11  A key assumption underlying this result is that the central banker cares about the state of the economy as well as about the income provided by his incentive contract. 12  In personal communication, Walsh reports to me that he was visiting a research institute in New Zealand at the time of these discussions.
That said, the risks remain that tight federal fiscal policy will restrain economic growth over the next few quarters by more than we currently expect, or that the debate concerning other fiscal policy issues, such as the status of the debt ceiling, will evolve in a way that could hamper the recovery.