Nominal Income Targeting / Robert E. Hall, N. Gregory Mankiw.

Format:

Book

Author/Creator:

Hall, Robert E.

Contributor:

National Bureau of Economic Research.

Mankiw, N. Gregory.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4439.

NBER working paper series no. w4439

Language:

English

Subjects (All):

Monetary policy.

National income.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1993.

Cambridge, Massachusetts : National Bureau of Economic Research, 1993.

Summary:

This paper discusses nominal income targeting as a possible rule for the conduct of monetary policy. We begin by discussing why a rule for monetary policy may be desirable and the characteristics that a good rule should have. We emphasize, in particular, three types of nominal income targets, which differ in how they respond to past shocks, to prices, and real economic activity. A key question is how any of these rules might be implemented in practice. We suggest that the consensus forecast of future nominal income could playa role in ensuring that the central bank does not deviate from its announced target. To show how economic performance might have differed historically if the Fed had been committed to some type of nominal income target, we offer simulations of a simple model of the economy. According to the simulations, the primary benefit of nominal income targeting would have been reduced volatility in the price level and the inflation rate. Whether real economic activity would have been less volatile is unclear.

Notes:

Print version record

August 1993.