Re: Stiglitz on central banks

["Devine, James" <jdevine@xxxxxxx>]

Title: RE: [PEN-L] Stiglitz on central banks

Stiglitz writes:
>During America's growth boom in the 1990s, the Clinton administration
believed that it was worth the risk of pushing the unemployment rate
lower, especially when the social gains - declining welfare roles, reduced
violence - were added to the economic benefits. By contrast, the IMF urged
tighter monetary policy, because it put far less weight on the cost of
unemployment, seemingly no weight on the ancillary benefits of reducing
it, and greater weight on the costs of potential inflation.

>The economic analysis of Clinton's council of economic advisers turned out
to be right; the models of the IMF (and the Fed) were wrong. America
secured a lower rate of unemployment without inflation - eventually
unemployment fell to below 4%.<

there's another story here, one that I believe that pen-l alumnus Brad deLong tells, i.e., that Alan Greenspan was willing to take the risk of lower unemployment rates (perhaps because he didn't want to pop the growing Wall Street bubble after 1995 or so). But Stiglitz gives credit to his former employer, the Clinton CEA -- while saying that the Fed's model was wrong.

Which view is accurate? To my mind, Stiglitz seems wrong, since fiscal policy (the province of the Clinton administration) was _contractionary_ during the late 1990s and monetary policy definitely let the boom and bubble occur.

Jim