The editorial examines the research of this year's Nobel economics laureates, Robert E. Hall and Michael Woodford, which shows that stabilization policy depends on household and firm expectations as well as how central banks communicate with the public. Hall found that spending depends on expectations of one's financial situation rather than only current income, and that lower-income households spend a larger share of income gains, so targeted support could be more effective. Woodford found that firms set prices based on future costs and competitors' prices, and his work provided the basis for the forward guidance used by many central banks. The editorial argues this research is valuable for central banks and Taiwan's policymakers, and that it contradicts Federal Reserve Chair Kevin Warsh's plan to end forward guidance and shorten post-meeting statements and news conferences.
Summary written by Upside AI from the original article. Read the source for full details.
Original headline: EDITORIAL : The art of economic policy
Read the original on taipeitimes.com ↗
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FedKevin Warshcentral bankmonetary policy
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