IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v19y2015i03p508-534_00.html
   My bibliography  Save this article

A “Working” Solution To The Question Of Nominal Gdp Targeting

Author

Listed:
  • Belongia, Michael T.
  • Ireland, Peter N.

Abstract

Although a number of economists have tried to revive the idea of nominal GDP targeting since the financial crisis of 2008, very little has been said about how this objective might be achieved in practice. This paper adopts and extends a strategy first outlined by Holbrook Working and later employed in the P-Star model. It presents a series of theoretical and empirical results to argue that Divisia monetary aggregates can be controlled by the Federal Reserve and that the trend velocities of these aggregates exhibit the stability required to make long-run targeting of a nominal objective feasible.

Suggested Citation

  • Belongia, Michael T. & Ireland, Peter N., 2015. "A “Working” Solution To The Question Of Nominal Gdp Targeting," Macroeconomic Dynamics, Cambridge University Press, vol. 19(3), pages 508-534, April.
    • Handle: RePEc:cup:macdyn:v:19:y:2015:i:03:p:508-534_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100514000601/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Leeper, Eric M. & Zha, Tao, 2003. "Modest policy interventions," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1673-1700, November.
    2. Hendrickson, Joshua R., 2014. "Redundancy Or Mismeasurement? A Reappraisal Of Money," Macroeconomic Dynamics, Cambridge University Press, vol. 18(7), pages 1437-1465, October.
    3. William A. Barnett, 2000. "Economic Monetary Aggregates: An Application of Index Number and Aggregation Theory," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 11-48, Emerald Group Publishing Limited.
    4. Tatom, John A., 2014. "U.S. monetary policy in disarray," Journal of Financial Stability, Elsevier, vol. 12(C), pages 47-58.
    5. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 139-235.
    6. Belongia, Michael T. & Ireland, Peter N., 2014. "The Barnett critique after three decades: A New Keynesian analysis," Journal of Econometrics, Elsevier, vol. 183(1), pages 5-21.
    7. Hallman, Jeffrey J & Porter, Richard D & Small, David H, 1991. "Is the Price Level Tied to the M2 Monetary Aggregate in the Long Run?," American Economic Review, American Economic Association, vol. 81(4), pages 841-858, September.
    8. Thoma, Mark A & Gray, Jo Anna, 1998. "Financial Market Variables Do Not Predict Real Activity," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 522-539, October.
    9. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 821-852.
    10. Flanders, M.J., 1996. "Left-and Right-Endogeneous Mony: A Tale of Two Books. Steven Horwitz, Monetary Evolution, Free Banking and Economic Order; L. Randall Wray, Money and Credit in Capitalist Economies, the Engogenous Mon," University of Western Ontario, Departmental Research Report Series 9610, University of Western Ontario, Department of Economics.
    11. William Barnett & Jia Liu & Ryan Mattson & Jeff Noort, 2013. "The New CFS Divisia Monetary Aggregates: Design, Construction, and Data Sources," Open Economies Review, Springer, vol. 24(1), pages 101-124, February.
    12. Barnett, William A., 2012. "Getting it Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262516888, December.
    13. Christopher A. Sims & Tao Zha, 2006. "Were There Regime Switches in U.S. Monetary Policy?," American Economic Review, American Economic Association, vol. 96(1), pages 54-81, March.
    14. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting \\"M\\" back in monetary policy," Proceedings, Federal Reserve Bank of Cleveland, pages 1217-1264.
    15. 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.
    16. R. Alton Gilbert, 1994. "A case study in monetary control, 1980-82," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 35-58.
    17. Belongia, Michael T, 1996. "Measurement Matters: Recent Results from Monetary Economics Reexamined," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1065-1083, October.
    18. Hetzel,Robert L., 2008. "The Monetary Policy of the Federal Reserve," Cambridge Books, Cambridge University Press, number 9780521881326.
    19. Richard G. Anderson & Barry E. Jones, 2011. "A comprehensive revision of the U.S. monetary services (divisia) indexes," Review, Federal Reserve Bank of St. Louis, vol. 93(Sep), pages 325-360.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael T. Belongia & Peter N. Ireland, 2012. "Quantitative Easing: Interest Rates and Money in the Measurement of Monetary Policy," Boston College Working Papers in Economics 801, Boston College Department of Economics.
    2. Michael T. Belongia & Peter N. Ireland, 2015. "Interest Rates and Money in the Measurement of Monetary Policy," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(2), pages 255-269, April.
    3. Michael T. Belongia & Peter N. Ireland, 2016. "Money and Output: Friedman and Schwartz Revisited," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(6), pages 1223-1266, September.
    4. 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.
    5. Belongia, Michael T. & Ireland, Peter N., 2019. "The demand for Divisia Money: Theory and evidence," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    6. Michael T. Belongia & Peter N. Ireland, 2021. "A Classical View of the Business Cycle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(2-3), pages 333-366, March.
    7. John W. Keating & Logan J. Kelly & A. Lee Smith & Victor J. Valcarcel, 2019. "A Model of Monetary Policy Shocks for Financial Crises and Normal Conditions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(1), pages 227-259, February.
    8. Richard G. Anderson & Marcelle Chauvet & Barry Jones, 2015. "Nonlinear Relationship Between Permanent and Transitory Components of Monetary Aggregates and the Economy," Econometric Reviews, Taylor & Francis Journals, vol. 34(1-2), pages 228-254, February.
    9. Michael T. Belongia & Peter N. Ireland, 2013. "Instability: Monetary and Real," Boston College Working Papers in Economics 830, Boston College Department of Economics.
    10. Anderson, Richard G. & Duca, John V. & Fleissig, Adrian R. & Jones, Barry E., 2019. "New monetary services (Divisia) indexes for the post-war U.S," Journal of Financial Stability, Elsevier, vol. 42(C), pages 3-17.
    11. Belongia, Michael T. & Ireland, Peter N., 2022. "A reconsideration of money growth rules," Journal of Economic Dynamics and Control, Elsevier, vol. 135(C).
    12. William Barnett, 2013. "Friedman and Divisia Monetary Measures," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201312, University of Kansas, Department of Economics, revised Dec 2013.
    13. Belongia, Michael T. & Ireland, Peter N., 2014. "The Barnett critique after three decades: A New Keynesian analysis," Journal of Econometrics, Elsevier, vol. 183(1), pages 5-21.
    14. Serletis, Apostolos & Xu, Libo, 2020. "Functional monetary aggregates, monetary policy, and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 121(C).
    15. William A. Barnett & Biyan Tang, 2016. "Chinese Divisia Monetary Index and GDP Nowcasting," Open Economies Review, Springer, vol. 27(5), pages 825-849, November.
    16. Dery, Cosmas & Serletis, Apostolos, 2021. "Interest Rates, Money, And Economic Activity," Macroeconomic Dynamics, Cambridge University Press, vol. 25(7), pages 1842-1891, October.
    17. Chen, Zhengyang & Valcarcel, Victor J., 2021. "Monetary transmission in money markets: The not-so-elusive missing piece of the puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 131(C).
    18. Michael T. Belongia & Peter N. Ireland, 2018. "Monetary Policy Lessons from the Greenbook," Boston College Working Papers in Economics 955, Boston College Department of Economics.
    19. Ioannis Andreadis & Athanasios D. Fragkou & Theodoros E. Karakasidis & Apostolos Serletis, 2023. "Nonlinear dynamics in Divisia monetary aggregates: an application of recurrence quantification analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-17, December.
    20. Barnett, William A. & Su, Liting, 2020. "Financial Firm Production Of Inside Monetary And Credit Card Services: An Aggregation Theoretic Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 24(1), pages 130-160, January.

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:19:y:2015:i:03:p:508-534_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.