Nominal GDP as the Stance of Monetary Policy: A Practical Guide

Abstract

Nominal GDP (NGDP) targeting has received a lot of attention over the past decade. This note provides a brief review of the key arguments for NGDP targeting and then presents some practical ways to use it in the conduct of U.S. monetary policy. Specifically, this note shows how to construct benchmark growth paths for NGDP that can help the Fed assess the stance of monetary policy. This approach provides a useful cross-check to other measures of the stance of monetary policy.

Keywords: Nominal GDP, Stance of Monetary Policy, Sticky-Price NGDP Forecast

JEL Classification: E4, E5