Facts, Fears, and Functionality of Nominal GDP Level Targeting: A Guide to a Popular Monetary Policy Framework

Abstract

Nominal GDP level targeting (NGDPLT) has become an increasingly popular monetary policy framework over the past decade. This rising popularity has led to increased interest in, as well as some confusion over, how this framework actually works. This paper responds to this interest by summarizing the basic facts of NGDPLT and by addressing some of the fears surrounding it. The paper also demonstrates how a NGDPLT might work in practice.

Keywords: Nominal GDP Targeting, Nominal Income Targeting, Monetary Policy Framework, Target

JEL Classification: E40, E42