The Fed's dual mandate

New speech from Chicago Fed President Charles Evans makes it clear why the Fed should be more aggressive in tackling the unemployment problem.

The entire article is well worth a good read. Relative to the concerns and comments from the disenting regional Fed presidents, his arguments are based both on macroeconomic theory and empirical studies.

What seems to be lacking, however, is more convincing arguments on the efficacy of un-conventional monetary policies such as QE. On this front, the article is drawing on works by Michael Woodford and perhaps Paul Krugman to argue for setting consistent policy expectations over the medium and the long run.

Ideally, the accommodative monetary policy is most effective when combined with an expansionary fiscal policy which can create final demand directly.