nominal gdp targeting

Nominal GDP

Targeting

Inflation Targeting

NGDP Targeting

=Total Current Dollar

Spending = Money Supply × Money Use

Nominal GDP

Money Supply

Money Demand

Encourages

Spending

Discourages

Spending

AdvantageDon’t need to know Money

Supply

AdvantageDon’t need to worry about

short-run changes to inflation

AdvantageMonetary policy becomes more

predictable

AdvantageDon’t need to

worry about real economy

NGDP level target

Time

Tota

l D

olla

r Sp

endi

ng

HOW IT WORKS

NGDP level target

Time

Tota

l Dol

lar

Spen

ding

HOW IT WORKS

WHAT ACTUALLY HAPPENED

Nominal GDP Targeting Not a New Idea• F.A. Hayek•“Any change in the velocity of circulation would have to be compensated by reciprocal change in the amount of money in circulation if money is to remain neutral…” (1935).

• Milton Friedman•“[T]he Fed must see to it that the quantity of money changes in such a way as to offset movements in velocity...” (2003).

The Fed & China

The Fed & China

The Fed & China

The Fed & China

The Fed & China

The Fed & China

The Fed & China