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Nominal GDP targeting: what are central bankers talking about?

Author

Listed:
  • Ágnes Csermely

    (Magyar Nemzeti Bank (central bank of Hungary))

  • Máté Barnabás Tóth

    (Magyar Nemzeti Bank (central bank of Hungary))

Abstract

During the current crisis, the question of how central banks should set their monetary policies after the key policy rate has reached the zero lower bound has provoked heated debates. One idea that has recently received attention is ‘nominal GDP targeting’, which many people believe is worth considering as a monetary policy option irrespective of the crisis. This article presents an overview of the pros and cons of nominal GDP targeting. Overall, targeting a specific level of nominal GDP could, in principle, help monetary policy to stabilise the real economy more effectively after the interest rate has reached the zero lower bound, but practical problems (e.g. frequent revisions of GDP data, uncertainty related to the measurement of potential output, etc.) raise questions about its applicability. For this reason, using nominal GDP targeting as a general policy strategy would not provide tangible benefits compared with the proven, flexible inflation targeting regimes.

Suggested Citation

  • Ágnes Csermely & Máté Barnabás Tóth, 2013. "Nominal GDP targeting: what are central bankers talking about?," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 8(2), pages 7-11, May.
    • Handle: RePEc:mnb:bullet:v:8:y:2013:i:2:p:7-11
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    File URL: http://www.mnb.hu/letoltes/csermely-toth.pdf
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    Cited by:

    1. Bryane Michael & Svitlana Osaulenko, 2021. "TOWARD A NEW COMPARATIVE PUBLIC LAW OF CENTRAL BANK LEGISLATION: Designing Legislative Mandates for Central Bank Private Securities Assets Purchases and Nominal GDP Targeting," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 10(1), pages 5-38.

    More about this item

    Keywords

    inflation targeting; nominal GDP targeting; forward guidance.;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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