Myopic monetary policies could lead to significant permanent output losses.
The article explores different ways the US can control inflation through monetary policy. It compares two approaches: one that reacts quickly to changes in output and inflation, and another that looks ahead to prevent the economy from overheating. The study shows that the second approach not only reduces economic ups and downs but also leads to higher overall output levels. This means that by being proactive, policymakers can help stabilize the economy and promote growth.