Janet Yellen Shows the Need for a 4 Percent Unemployment Target

September 29, 2015 12:39 AM

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Janet Yellen Shows the Need for a 4 Percent Unemployment Target

In a speech last week, Federal Reserve Board Chair Janet Yellen inadvertently told us why Congress should set a 4 percent unemployment target for the Fed in its conduct of monetary policy, as is proposed in a new bill put forward by Michigan Representative John Conyers. The context was Yellen's dismissal of such a target.

The maximum level of employment is something that is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. Moreover, the maximum level of employment, the longer-run 'natural' rate of unemployment, and other related aspects of the labor market are not d...

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