Financial Stability and Nominal GDP Targeting
14 Pages Posted: 27 Dec 2024
Date Written: December 10, 2024
Abstract
Nominal GDP (NGDP) targeting is a simpler, more intuitive, and more robust monetary policy strategy than the Federal Reserve’s current approach, which is too narrowly focused on the economic circumstances of the 2010s. NGDP targeting also takes into greater account important links between how policy is conducted and the vulnerability of the financial sector—and the economy more generally—to adverse supply shocks. NGDP targeting can enhance financial stability and, at the same time, support the Federal Open Market Committee’s full- employment and long- run-price stability mandates.
Keywords: monetary policy, Federal Reserve, economic policy, inflation, nominal GDP targeting
JEL Classification: E5, E6, E52, E58
Suggested Citation: Suggested Citation