The 'Woodford Period': A Bourbon for Bernanke?, Twenty Cent Paradigms: The news release summarizing St. Louis Fed President's James Bullard's recent speech on the "current stance of monetary policy" includes the following:
He stated that “the current St. Louis Fed forecast for the unemployment rate implies that the 6.5 percent threshold will be crossed in June 2014.” However, he noted, the policy rate implied jointly by the Taylor (1999) rule and the St. Louis Fed forecasts should increase in August 2013. Thus, “The Committee’s thresholds imply a ‘Woodford period’ since the policy rate would be held at zero past the point where ordinary FOMC behavior would indicate an increase,” Bullard said.
William McChesney Martin, who chaired the Fed in the 1950's and 60's once said it was the Fed's job "to take the punch bowl away just as the party gets going." It sounds like the Fed's new corollary to Martin's rule involves leisurely sipping bourbon for a while when the economic slump is ending. If the slump is the hangover from a financial crisis, maybe its kind of a "hair of the (monetary) dog" thing.
The release continues:
The period from August 2013 to June 2014 would be the “Woodford period,” which refers to Michael Woodford of Columbia University. “According to received theory, this is a more stimulative monetary policy and possibly even an optimal monetary policy when the zero lower bound is constraining,” Bullard added.
Thursday, February 21, 2013