Question A:
If the Fed changed its inflation target from 2% to 4%, the long-run costs of inflation for households would be essentially unchanged.
Responses
Responses weighted by each expert's confidence
Question B:
Raising the inflation target to 4% would make it possible for the Fed to lower rates by a greater amount in a future recession.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Daron Acemoglu |
MIT | Bio/Vote History | ||
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 Alberto Alesina |
Harvard | Bio/Vote History | ||
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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 Katherine Baicker |
University of Chicago | Did Not Answer | Bio/Vote History | |
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 Abhijit Banerjee |
MIT | Bio/Vote History | ||
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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since inflation distorts the portfolio choice, Brunnermeier & Sannikov "On the Optimal Inflation Rate" (AER PP).
Also 4% can't be ignored
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 Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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 Judith Chevalier |
Yale | Did Not Answer | Bio/Vote History | |
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Assuming that the change did not also compromise the credibility of the Fed's (new) inflation target.
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 Liran Einav |
Stanford | Bio/Vote History | ||
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 Ray Fair |
Yale | Bio/Vote History | ||
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 Amy Finkelstein |
MIT | Bio/Vote History | ||
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 Pinelopi Goldberg |
Yale | Did Not Answer | Bio/Vote History | |
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 Austan Goolsbee |
Chicago | Bio/Vote History | ||
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If they did this now, costs would be unchanged because they have not even been able to get to 2 so not credible to promise 4
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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I tend to agree but I think the evidence is more based on intuition and theory than on empirical evidence.
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 Robert Hall |
Stanford | Did Not Answer | Bio/Vote History | |
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 Oliver Hart |
Harvard | Bio/Vote History | ||
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I think that people can cope with low rates of inflation well, and 4% falls into that category. I wouldn't want to go much higher though.
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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 Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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Nominal features of the tax code will drag down growth. Higher inflation may have higher uncertainty.
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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big retirement planning mistakes from nominal illusion would become more common&empirical regularity of more volatile inflation possible too
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 Pete Klenow |
Stanford | Bio/Vote History | ||
 Jonathan Levin |
Stanford | Bio/Vote History | ||
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 Eric Maskin |
Harvard | Bio/Vote History | ||
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Even if the inflation targets are met, the answer depends on how much price indexing, etc, is done
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 William Nordhaus |
Yale | Bio/Vote History | ||
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 Larry Samuelson |
Yale | Bio/Vote History | ||
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If the target change leads to higher inflation (otherwise, why raise the target?), then households will bear the attendant costs.
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 José Scheinkman |
Columbia University | Bio/Vote History | ||
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I am uncertain about the magnitude of costs at these levels of inflation.
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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Hard to be very confident, particularly about the durability of the target.
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 Carl Shapiro |
Berkeley | Bio/Vote History | ||
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 Robert Shimer |
University of Chicago | Bio/Vote History | ||
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The welfare cost of inflation is the area under the money demand curve. This implies a cost of about $60bn/yr from the proposed policy
-see background information here |
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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Daron Acemoglu |
MIT | Bio/Vote History | ||
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Alberto Alesina |
Harvard | Bio/Vote History | ||
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Joseph Altonji |
Yale | Bio/Vote History | ||
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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Katherine Baicker |
University of Chicago | Did Not Answer | Bio/Vote History | |
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Abhijit Banerjee |
MIT | Bio/Vote History | ||
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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provided inflation target is hit (on average)
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Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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Judith Chevalier |
Yale | Did Not Answer | Bio/Vote History | |
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David Cutler |
Harvard | Bio/Vote History | ||
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Angus Deaton |
Princeton | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Liran Einav |
Stanford | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Amy Finkelstein |
MIT | Bio/Vote History | ||
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Pinelopi Goldberg |
Yale | Did Not Answer | Bio/Vote History | |
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Austan Goolsbee |
Chicago | Bio/Vote History | ||
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4 is not credible now. It would not give any bonus to policy making until Fed can show they could actually get to 4
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Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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Robert Hall |
Stanford | Did Not Answer | Bio/Vote History | |
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Oliver Hart |
Harvard | Bio/Vote History | ||
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Nominal rates would be higher and so could be reduced without hitting the zero lower bound. Also real rates would be lower.
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Bengt Holmström |
MIT | Bio/Vote History | ||
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Caroline Hoxby |
Stanford | Bio/Vote History | ||
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Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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That is technically true, but I doubt that it would justify a higher interest rate target.
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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assumes they are on or close to target when the recession comes.
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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Eric Maskin |
Harvard | Bio/Vote History | ||
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Higher inflation rates often imply higher nominal interest rates, giving the Fed greater leeway.
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William Nordhaus |
Yale | Bio/Vote History | ||
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Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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Larry Samuelson |
Yale | Bio/Vote History | ||
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We've already seen rates go as low as they can, so a higher inflation target opens up little room for lower rates.
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José Scheinkman |
Columbia University | Bio/Vote History | ||
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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Carl Shapiro |
Berkeley | Bio/Vote History | ||
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Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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