If Mitt Romney Becomes the Next President...

I hope he appoints Greg Mankiw as the next Fed chairman.  Here is a post from October, 2011 that explains why Mankiw would be a great choice:

Back in May, 2011 I wrote the following on my blog:

Greg Mankiw recently referred to a paper where he assess which inflation rate should be targeted by the central bank.  Here is his conclusion:

[A]central
bank that wants to achieve maximum stability of economic activity
should use a price index that gives substantial weight to the level of
nominal wages. 

There are several good reasons laid out in the paper
for targeting nominal wages.  Here I like to point out that stabilizing
nominal wages is similar to stabilizing nominal income per capita.  It
is not too much of a stretch to go from this to a nominal income or
nominal GDP target.  In fact, Greg Mankiw and Robert Hall have a 1994 paper
that sings the praises of a nominal GDP target, especially one that
that targets the consensus forecast of the nominal GDP level. 

So where does Greg Mankiw stand
today on nominal GDP level targeting?  If he still supports it, does he
see the need to return nominal GDP back to its pre-crisis trend or at
least higher than its current level?

Though I have never got a direct answer from Greg Mankiw, there is now
enough circumstantial evidence to know his answers to my questions.
First, he and coauthor Matthew Weinzierl have a recent Brookings Paper
on the optimal stabilization policy.  They go through a menu of policy
options, but reach this conclusion if monetary policy is not
constrained:

The second level of the hierarchy applies when the short-term interest
rate hits against the zero lower bound. In this case, unconventional
monetary policy becomes the next policy instrument to be used to restore
full employment. A reduction in long-term interest rates may be
sufficient when a cut in the short-term interest rate is not. And an
increase in the long-term nominal anchor is, in this model, always
sufficient to put the economy back on track. This policy might be
interpreted, for example, as the central bank targeting a higher level of nominal GDP growth.

In other words, monetary policy targeting a nominal GDP level is
sufficient to bring the economy back to full employment.  That sounds
like a rather favorable view of nominal GDP level targeting to me.   If
that were not enough, Greg Mankiw today implicitly endorses nominal GDP
level targeting by linking on his blog to the Goldman Sachs paper on nominal GDP level targeting.  I’d say Mankiw has answered my questions clearly.

Now Mankiw is not just a big-time academic economist at Harvard.  He is
also an economic adviser to  Mitt Romney, the likely GOP candidate for
president.  That means NGDP level targeting might eventually find its
way into the White House.  There are good reasons for Republicans to endorse such an approach to monetary policy.  I hope Mitt Romney is hearing them.