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The productivity gap: Monetary policy, the subprime boom, and the post-2001 productivity surge

Listed author(s):
  • Selgin, George
  • Beckworth, David
  • Bahadir, Berrak

It is widely believed that, in the wake of the dot.com crash, the Fed kept the federal funds target rate too low for too long, inadvertently contributing to the subprime boom. We attribute this and other Fed departures from a “neutral” policy stance to the Fed's failure to respond appropriately to exceptional rates of total factor productivity growth. We then show how the Fed, by adhering to a nominal GDP growth rate target, might have succeeded in maintaining such a neutral stance.

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File URL: http://www.sciencedirect.com/science/article/pii/S0161893815000277
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Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 37 (2015)
Issue (Month): 2 ()
Pages: 189-207

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Handle: RePEc:eee:jpolmo:v:37:y:2015:i:2:p:189-207
DOI: 10.1016/j.jpolmod.2015.02.005
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

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