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The alleged instability of nominal income targeting Author info | Abstract | Publisher info | Download info | Related research | Statistics Bennett T. McCallum (Reserve Bank of New Zealand )
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Recently it has been argued that a monetary policy of nominal income targeting would result in dynamically unstable processes for output and inflation. That result holds in a theoretical model that includes backward-looking IS and Phillips curve relations, but these are rather special and theoretically unattractive. The present paper demonstrates that replacement of the special Phillips curve with one of several more plausible specifications overturns the instability result, whether or not the IS equation is replaced with a forward-looking version. Thus the instability result is quite fragile and therefore provides almost no basis for a negative judgment regarding nominal income targeting.
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Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number
G97/6.
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Date of creation: Aug 1997Date of revision:
Handle: RePEc:nzb:nzbdps:1997/06Contact details of provider: Postal: P.O. Box 2498, Wellington Phone: 64 4 471-3767 Fax: 64 4 471-2270 Email: Web page: http://www.rbnz.govt.nz More information through EDIRC
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Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
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Bennett T. McCallum & Edward Nelson, 2000.
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