Falling NGDP Makes Mountains out of Mole Hills

Further verification that the cause of the deepest part of the recession (2008Q3 onward) was tight money causing falling NGDP. Check out this map, courtesy of Mark Thoma:

Most of the country never experienced a housing boom, much less a bust. But the entire country (minus ND) experienced rising unemployment, and declining output.

What links the rest of the country with the most hard-hit markets? NGDP growth levels, of course!


8 thoughts on “Falling NGDP Makes Mountains out of Mole Hills

  1. Mr. Perello,

    NGDP targeting theories have been bandied about since monetarism gained traction in the late seventies. Todd Clark, who worked under the FED (and I believe was subsequently put on gag order by none other than the Maestro) was writing about it pretty extensively in the nineties. The thing is, change of the guards don’t happen all that much in times of normalcy. Now that everything has hit the fan, the orthodoxy is more open to heterodox ideas.

    1. Here is a list, I don’t have time to provide links, but I will in a future blog.

      Earl Thomson, Robert Hall, Ed Glasner, Scott Sumner, Robert Hetzel, Bill Woolsey, Lars Svensson, Aaron Jackson, Douglas Dowd…

      Some lesser known economists who have advocated forward-looking monetary policy:

      Ben Bernanke, Paul Krugman.


      1. No problem, even had you been a master of the topic, NGDP targeting is still obscure enough not to have known of it. I hope your exposure to Economics has been quaint enough.

  2. Anyway, looking at my old stomping grounds (Oregon). It seems Bend was a bubble, which any sane person could have told you.

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