there's another story here, one that I believe that pen-l alumnus Brad deLong tells, i.e., that Alan Greenspan was willing to take the risk of lower unemployment rates (perhaps because he didn't want to pop the growing Wall Street bubble after 1995 or so). But Stiglitz gives credit to his former employer, the Clinton CEA -- while saying that the Fed's model was wrong.
Which view is accurate? To my mind, Stiglitz seems wrong, since fiscal policy (the province of the Clinton administration) was _contractionary_ during the late 1990s and monetary policy definitely let the boom and bubble occur.
Further, Greenspan started worrying about deflation early on, and resisted pressure from Wall Street and his colleagues to tighten around 1996.
Another odd thing about Stiggy's argument is that he implicitly buys the crowding out argument, which liberal Keynesians aren't supposed to do.
Doug
