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Nominal GDP targeting: Policy rule or discretionary splurge?

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  • McCallum, Bennett T.

Abstract

In a neo-canonical monetary policy model, targeting of nominal GDP in terms of growth rates (not growing levels) is analytically equivalent to adoption of a policy that is optimal from a “timeless perspective,” in the sense developed by Woodford and widely utilized in recent monetary policy analysis.

Suggested Citation

  • McCallum, Bennett T., 2015. "Nominal GDP targeting: Policy rule or discretionary splurge?," Journal of Financial Stability, Elsevier, vol. 17(C), pages 76-80.
    • Handle: RePEc:eee:finsta:v:17:y:2015:i:c:p:76-80
    DOI: 10.1016/j.jfs.2014.12.004
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    References listed on IDEAS

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    1. Robert E. Hall & N. Gregory Mankiw, 1994. "Nominal Income Targeting," NBER Chapters, in: Monetary Policy, pages 71-94, National Bureau of Economic Research, Inc.
    2. Robert King & Alexander L. Wolman, 1999. "What Should the Monetary Authority Do When Prices Are Sticky?," NBER Chapters, in: Monetary Policy Rules, pages 349-404, National Bureau of Economic Research, Inc.
    3. McCallum, Bennett T., 2009. "Inflation determination with Taylor rules: Is new-Keynesian analysis critically flawed?," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1101-1108, November.
    4. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    5. McCallum, Bennett T., 1990. "Could a monetary base rule have prevented the great depression?," Journal of Monetary Economics, Elsevier, vol. 26(1), pages 3-26, August.
    6. Carl E. Walsh, 2010. "Monetary Theory and Policy, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262013770, December.
    7. Lars E.O. Svensson, 2003. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 145-166, Fall.
    8. McCallum, Bennett T., 1999. "Issues in the design of monetary policy rules," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 23, pages 1483-1530, Elsevier.
    9. Cochrane, John H., 2009. "Can learnability save new-Keynesian models?," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1109-1113, November.
    10. Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January.
    11. Michael Woodford, 1999. "Commentary : how should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 277-316.
    12. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    13. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, June.
    14. Meade, James E, 1993. "The Meaning of "Internal Balance."," American Economic Review, American Economic Association, vol. 83(6), pages 3-9, December.
    15. Tobin, James, 1983. "Monetary Policy: Rules, Targets, and Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(4), pages 506-518, November.
    16. Richard Dennis, 2001. "Pre-commitment, the timeless perspective, and policymaking from behind a veil of uncertainty," Working Paper Series 2001-19, Federal Reserve Bank of San Francisco.
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    Citations

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    Cited by:

    1. Gerald P. O'Driscoll Jr., 2016. "Monetary Policy and the Knowledge Problem," Cato Journal, Cato Journal, Cato Institute, vol. 36(2), pages 337-352, Spring/Su.
    2. Benchimol, Jonathan, 2024. "Central bank objectives, monetary policy rules, and limited information," Journal of Macroeconomics, Elsevier, vol. 80(C).
    3. repec:hal:spmain:info:hdl:2441/5nf0balck3981o9ril8lj58pud is not listed on IDEAS
    4. Christophe Blot & Jérôme Creel & Xavier Ragot, 2015. "Flexible inflation targeting vs nominal GDP targeting in the euro area," Working Papers hal-03429880, HAL.
    5. Jonathan Benchimol & André Fourçans, 2016. "Nominal income versus Taylor-type rules in practice," Working Papers hal-01357870, HAL.
    6. Davide Debortoli & Ricardo Nunes, 2014. "Monetary Regime Switches and Central Bank Preferences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(8), pages 1591-1626, December.
    7. Ortiz, Marco & Inca, Arthur & Solf, Fabrizio, 2024. "Welfare implications of nomimal GDP targeting in a small open economy," MPRA Paper 119999, University Library of Munich, Germany.
    8. Samuel Addo, 2018. "Policy regime changes and central bank prefernces," Working Papers 752, Economic Research Southern Africa.
    9. 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.
    10. Christophe Blot & Jérôme Creel & Xavier Ragot, 2015. "Flexible inflation targeting vs nominal GDP targeting in the euro area," Sciences Po publications info:hdl:2441/5nf0balck39, Sciences Po.
    11. Ryan H. Murphy & Jiawen Chen, 2017. "A simple empirical investigation into the optimal size of the NGDP Target and Level targeting," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 354-369, April.
    12. Jonathan Benchimol & André Fourçans, 2017. "Monetary Rule, Central Bank Loss and Household’s Welfare: an Empirical Investigation," Globalization Institute Working Papers 329, Federal Reserve Bank of Dallas.

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