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Nominal GDP futures targeting

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  • Sumner, Scott

Abstract

Central banks have recently done a poor job of stabilizing the path of nominal expenditures. The adverse demand shock of 2008–2009 led to a severe recession in the United States and Europe. Monetary policy could be greatly improved with a regime of “targeting the forecast,” or setting policy so that the expected growth in nominal GDP is equal to the central bank's target growth rate. This goal could be accomplished by setting up a nominal GDP prediction market and then adjusting the monetary base to stabilize nominal GDP futures prices. The market, not central banks, would set the level of the monetary base and short-term interest rates under this sort of policy regime. Modest adjustments in such a regime could address many previous criticisms of futures targeting.

Suggested Citation

  • Sumner, Scott, 2015. "Nominal GDP futures targeting," Journal of Financial Stability, Elsevier, vol. 17(C), pages 65-75.
    • Handle: RePEc:eee:finsta:v:17:y:2015:i:c:p:65-75
    DOI: 10.1016/j.jfs.2014.10.001
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    3. Peter J. Boettke & Alexander W. Salter & Daniel J. Smith, 2018. "Money as meta-rule: Buchanan’s constitutional economics as a foundation for monetary stability," Public Choice, Springer, vol. 176(3), pages 529-555, September.
    4. Jonathan Benchimol & André Fourçans, 2016. "Nominal income versus Taylor-type rules in practice," Working Papers hal-01357870, HAL.
    5. 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.
    6. Sumner, Scott, 2017. "Monetary policy rules in light of the great recession," Journal of Macroeconomics, Elsevier, vol. 54(PA), pages 90-99.
    7. Benchimol, Jonathan & Fourçans, André, 2019. "Central bank losses and monetary policy rules: A DSGE investigation," International Review of Economics & Finance, Elsevier, vol. 61(C), pages 289-303.
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    10. James Caton, 2020. "The evolution of Hayek's thought on gold and monetary standards," Southern Economic Journal, John Wiley & Sons, vol. 87(1), pages 386-405, July.
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