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Nominal Income Targeting

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  • Victor E. Argy
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    Abstract

    This paper evaluates the proposal that government authorities ought to target nominal income. It begins by viewing the literature in some detail. It then undertakes a theoretical analysis of the proposal first for the small country and next for the large country. There is then a general discussion of various issues posed by nominal income targeting. Finally, the paper summarizes the empirical work to date. We show that traditional theoretical analysis tends to be too simple and overly biased in favor of nominal income targeting. When more realistic assumptions are made or econometric simulations are undertaken the case for nominal income targeting is substantially weakened but not, however, destroyed.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 91/92.

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    Length: 114
    Date of creation: 01 Oct 1991
    Date of revision:
    Handle: RePEc:imf:imfwpa:91/92

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    Related research

    Keywords: Income; Wage indexation; money stock; monetary policy; inflation; real interest rate; money demand; price level; aggregate demand; real variables; money growth; real interest rates; monetary authorities; monetary fund; money market; money supply; monetary expansion; rational expectations; rate of inflation; price stability; interest rate targeting; money markets; inflation target; monetary targets; monetary economics; foreign currency; optimal monetary policy; monetary instrument; inflation rate; monetary disturbance; real wages; nominal variables; monetary policies; expansionary monetary policy; optimal ? monetary policy; monetary authority; monetary instruments; monetary regimes; monetary policy rule; central bank; monetary policy strategies; relative price; monetary system; real money; tight monetary policies; inflation targeting; monetary policy objectives; monetary policy strategy; monetary arrangements; real exchange rates; monetary target; money balances; international monetary system; lower inflation; domestic monetary policy; discretionary monetary policy; monetary regime; international monetary arrangements; monetary aggregates; tight monetary policy; independent monetary policy;

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    Cited by:
    1. Stan du Plessis & Malan Rietveld, 2013. "Should inflation targeting be abandoned in favour of nominal income targeting?," Working Papers 12/2013, Stellenbosch University, Department of Economics.
    2. Dale W. Henderson & Warwick J. McKibbin, 1993. "A comparison of some basic monetary policy regimes for open economies: implications of different degrees of instrument adjustment and wage persistence," International Finance Discussion Papers 458, Board of Governors of the Federal Reserve System (U.S.).
    3. Funke, Norbert, 1992. "Wage formation and monetary policy rules," Kiel Working Papers 514, Kiel Institute for the World Economy.

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