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Using Futures Instrument Prices to Target Nominal Income

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  • Sumner, Scott

Abstract

Nominal GDP targeting offers the advantage of allowing monetary policymakers to offset velocity shocks and cushion the impact of autonomous price shocks. Instability associated with the recognition lag can be minimized by fixing a futures instrument price linked to nominal GNP. In fact, if financial markets are efficient, then a policy of fixing futures instrument prices would seem preferable to a policy feedback mechanism for any economic aggregate target that involves a recognition lag. This conclusion is robust with respect to a wide range of macroeconomic models. Copyright 1989 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Suggested Citation

  • Sumner, Scott, 1989. "Using Futures Instrument Prices to Target Nominal Income," Bulletin of Economic Research, Wiley Blackwell, vol. 41(2), pages 157-162, April.
    • Handle: RePEc:bla:buecrs:v:41:y:1989:i:2:p:157-62
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    1. The Chicago School of Economics
      by ssumner in The Money Illusion on 2014-12-04 22:51:08

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    Cited by:

    1. Belongia, Michael T. & Ireland, Peter N., 2017. "Circumventing the zero lower bound with monetary policy rules based on money," Journal of Macroeconomics, Elsevier, vol. 54(PA), pages 42-58.
    2. repec:dau:papers:123456789/11496 is not listed on IDEAS
    3. Hendrickson, Joshua R., 2022. "Commodity money, free banking, and nominal income targeting: Lessons for monetary policy reform," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 462-477.
    4. Sumner, Scott, 2015. "Nominal GDP futures targeting," Journal of Financial Stability, Elsevier, vol. 17(C), pages 65-75.
    5. Alexander William Salter, 2013. "Not all NGDP Is Created Equal: A Critique of Market Monetarism," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 29(Fall 2013), pages 41-52.
    6. Salter, Alexander William & Young, Andrew T., 2018. "Would a free banking system stabilize NGDP growth?," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 21-25.
    7. Jackson, Aaron L., 2010. "Policy futures markets with multiple goals," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 45-54, March.
    8. Scott Sumner, 2015. "What Would Milton Friedman Have Thought of the Great Recession?," American Journal of Economics and Sociology, Wiley Blackwell, vol. 74(2), pages 209-235, March.
    9. Selgin, George & Lastrapes, William D. & White, Lawrence H., 2012. "Has the Fed been a failure?," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 569-596.
    10. Sumner, Scott, 2021. "The Princeton School and the Zero Lower Bound," Working Papers 10999, George Mason University, Mercatus Center.
    11. Sumner Scott, 2006. "Let a Thousand Models Bloom: The Advantages of Making the FOMC a Truly 'Open Market'," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-27, October.
    12. Nicolás Cachanosky & Alexander W. Salter, 2020. "The super-alertness of central banks," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 33(1), pages 187-200, March.
    13. Dai, Meixing, 1998. "Les effets stabilisants de la zone-cible du taux d’inflation [The stabilising effects of inflation-targeting zone]," MPRA Paper 13856, University Library of Munich, Germany, revised Nov 2001.
    14. Hendrickson, Joshua R. & Salter, Alexander W., 2018. "Going beyond monetary constitutions: The congruence of money and finance," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 22-28.
    15. W. William Woolsey, 1994. "Stabilizing The Expected Price Level In A Bfh Payments System," Contemporary Economic Policy, Western Economic Association International, vol. 12(2), pages 46-54, April.
    16. Scott Sumner, 1992. "Index Future Convertibility: Reply to Woolsey," Cato Journal, Cato Journal, Cato Institute, vol. 12(2), pages 487-492, Fall.
    17. W. William Woolsey, 1992. "The Search for Macroeconomic Stability: Comment on Sumner," Cato Journal, Cato Journal, Cato Institute, vol. 12(2), pages 475-485, Fall.
    18. Alexander Salter, 2014. "Is there a self-enforcing monetary constitution?," Constitutional Political Economy, Springer, vol. 25(3), pages 280-300, September.
    19. Alexander William Salter & Andrew T. Young, 2015. "Would a Free Banking System Target NGDP Growth?," Working Papers 15-08, Department of Economics, West Virginia University.
    20. Paniagua Pablo, 2016. "The Stability Properties of Monetary Constitutions," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 22(2), pages 113-138, December.
    21. Scott Sumner, 2014. "Nominal GDP Targeting: A Simple Rule to Improve Fed Performance," Cato Journal, Cato Journal, Cato Institute, vol. 34(2), pages 315-337, Spring/Su.

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