Financial Stability and Nominal GDP Targeting

14 Pages Posted: 27 Dec 2024

See all articles by Evan F. Koenig

Evan F. Koenig

Federal Reserve Banks - Federal Reserve Bank of Dallas

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

Koenig, Evan F., Financial Stability and Nominal GDP Targeting (December 10, 2024). Federal Reserve Framework Review Series (Mercatus Center), Available at SSRN: https://ssrn.com/abstract=5073787 or http://dx.doi.org/10.2139/ssrn.5073787

Evan F. Koenig (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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