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All in the family: the close connection between nominal-GDP targeting and the Taylor Rule

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  • Evan F. Koenig

Abstract

The classic Taylor rule for adjusting the stance of monetary policy is formally a special case of nominal- gross-domestic-product (GDP) targeting. Suitably implemented, moreover, nominal-GDP targeting satisfies the definition of a \\"flexible inflation targeting\\" policy rule. However, nominal-GDP targeting would require more discipline from policymakers than some analysts think is realistic.

Suggested Citation

  • Evan F. Koenig, 2012. "All in the family: the close connection between nominal-GDP targeting and the Taylor Rule," Staff Papers, Federal Reserve Bank of Dallas, issue Mar.
    • Handle: RePEc:fip:feddst:y:2012:i:mar:n:17
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    References listed on IDEAS

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    1. Koenig, Evan F., 1996. "Targeting nominal income: A closer look," Economics Letters, Elsevier, vol. 51(1), pages 89-93, April.
    2. Matthias Doepke & Martin Schneider, 2006. "Inflation and the Redistribution of Nominal Wealth," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1069-1097, December.
    3. Bennett T. McCallum, "undated". "The Alleged Instability of Nominal Income Targeting," GSIA Working Papers 1998-20, Carnegie Mellon University, Tepper School of Business.
    4. Bean, Charles R, 1983. "Targeting Nominal Income: An Appraisal," Economic Journal, Royal Economic Society, vol. 93(372), pages 806-819, December.
    5. Dennis, Richard, 2001. "Inflation Expectations and the Stability Properties of Nominal GDP Targeting," Economic Journal, Royal Economic Society, vol. 111(468), pages 103-113, January.
    6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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    Cited by:

    1. David Beckworth, 2017. "The monetary policy origins of the eurozone crisis," International Finance, Wiley Blackwell, vol. 20(2), pages 114-134, June.
    2. James B. Bullard & Riccardo DiCecio, 2019. "Optimal Monetary Policy for the Masses," Working Papers 2019-009, Federal Reserve Bank of St. Louis, revised 25 Jul 2023.
    3. Veetil, Vipin P. & Wagner, Richard E., 2018. "Nominal GDP stabilization: Chasing a mirage," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 227-236.
    4. Raffinot, Thomas, 2017. "Interest-Rates-Free Monetary Policy Rule," Working Papers 06898, George Mason University, Mercatus Center.
    5. Christophe Blot & Jérôme Creel & Xavier Ragot, 2015. "Flexible inflation targeting vs nominal GDP targeting in the euro area," Sciences Po publications info:hdl:2441/5nf0balck39, Sciences Po.
    6. Alexander Salter, 2014. "Is there a self-enforcing monetary constitution?," Constitutional Political Economy, Springer, vol. 25(3), pages 280-300, September.
    7. repec:hal:spmain:info:hdl:2441/5nf0balck3981o9ril8lj58pud is not listed on IDEAS
    8. Christophe Blot & Jérôme Creel & Xavier Ragot, 2015. "Flexible inflation targeting vs nominal GDP targeting in the euro area," Sciences Po publications info:hdl:2441/5nf0balck39, Sciences Po.

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    Keywords

    Monetary policy;

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