• Mon. Feb 26th, 2024

Javier Milei’s Stability Plan Struggles with Similar Dilemma as Greenspan Faced in 90s: The Importance of Clear Communication in Economic Policy”.


Feb 11, 2024
Economists Powell, Caputo and their application of the Greenspan rule

The Federal Reserve, led by former Chairman Alan Greenspan, once faced a similar dilemma to the one currently experienced by Javier Milei’s government. Greenspan was known for his tactical view of the power of words and their impact on the economy, and he resisted adopting an inflation targeting scheme to control prices. He believed that economists’ words were overrated and did not want monetary policy to be transparent to investors, companies, and savers.

In contrast, Milei’s government has based its stabilization plan on a fiscal announcement but has made moves that are contrary to campaign promises. Their explanations for reaching objectives have not been convincing, leading to confusion in the market. This lack of clarity is reminiscent of Greenspan’s advice not to go or say anything when invited to speak publicly.

The same problem seems to be occurring in Argentina, where economic officials are following Greenspan’s rule of “going but not saying anything” in their public appearances. This lack of communication has led to uncertainty and speculation in the market.

Greenspan’s cautionary tale serves as a reminder for policymakers about the importance of clear communication and transparency in their public statements. By providing clarity and avoiding ambiguity, policymakers can avoid confusion and uncertainty in the market while achieving their objectives effectively.

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