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Nominal Income Targeting in an Open-Economy Optimizing Model

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  • McCallum, B.T.
  • Nelson, E.

Abstract

The purpose of this paper is to examine the merits of monetary policy rules that utilize as their principal target variable the level or growth rate of some aggregate reasure of nominal spending, such as nominal GDP, rather than a monetary aggregate or an index of inflation (either alone or in combination with some measure of the output gap). Because there is a large and rich literature on nominal income targeting, (briefly, NIT), we begin in Section 2 with a short review of existing arguments in its favor. Then in Section # we present some evidence which suggests that NIT is in effect utilized in practice in the United States.

Suggested Citation

  • McCallum, B.T. & Nelson, E., 1998. "Nominal Income Targeting in an Open-Economy Optimizing Model," Papers 644, Stockholm - International Economic Studies.
  • Handle: RePEc:fth:stocin:644
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    More about this item

    Keywords

    MONETARY POLICY ; GROSS DOMESTIC PRODUCT ; INFLATION ; UNITED STATES STOCKHOLM SWEDEN. 37p.;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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