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A nominal income target is a monetary policy target. Such targets are adopted by central banks to manage[1] national economic activity. Nominal aggregates are not adjusted for inflation. Nominal income aggregates that can serve as targets include nominal gross domestic product (NGDP) and nominal gross domestic income (GDI).[2] Central banks use a variety of techniques to hit their targets, including conventional tools such as interest rate targeting or open market operations, unconventional tools such as quantitative easing or interest rates on excess reserves and expectations management to hit its target. The concept of NGDP targeting was formally proposed by neo-Keynesian economists James Meade in 1977 and James Tobin in 1980,[list 1] although Austrian School economist Friedrich Hayek argued in favor of the stabilization of nominal income as a monetary policy norm as early as 1931 and as late as 1975.[7][8]
The concept was resuscitated and popularized in the wake of the 2008 financial crash by a group of economists (most notably Scott Sumner) whose views came to be known as market monetarism.[9] They claimed that the crisis would have been far less severe had central banks adopted some form of nominal income targeting.
- ^ "Goldman Sachs Recommends Fed Boost the Economy". Scribd. 2012-01-18. Archived from the original on 2011-11-04. Retrieved 2012-09-05.
- ^ "The case for GDI: a Q&A with Jeremy Nalewaik". www.ft.com.
- ^ Meade, James (September 1978), "The Meaning of "Internal Balance"", The Economic Journal, 88 (351), Wiley-Blackwell: 423–435, doi:10.2307/2232044, JSTOR 2232044
- ^ Meade, James (December 1993), "The Meaning of "Internal Balance"", The American Economic Review, 83 (6), American Economic Association: 1–9, JSTOR 2118018
- ^ Tobin, James (1980), "Stabilization policy ten years after" (PDF), Brookings Papers on Economic Activity, 11 (1), Brookings Institution: 19–90, doi:10.2307/2534285, JSTOR 2534285
- ^ Tobin, James (1980). "Stabilization Policy Ten Years After" (PDF). Brookings Papers on Economic Activity. 1980 (1). Brookings Institution: 19–89. doi:10.2307/2534285. JSTOR 2534285.
- ^ Hayek, Friedrich (2008). Salerno, Joseph T. (ed.). Prices and Production and Other Works On Money, the Business Cycle, and the Gold Standard (PDF). Auburn, AL: Ludwig von Mises Institute. p. 297. ISBN 978-1933550220.
- ^ Hayek, Friedrich (April 9, 1975). "A Discussion with Friedrich A. von Hayek" (PDF) (Interview). Washington, D.C.: American Enterprise Institute. pp. 12–13. ISBN 0844731900.
- ^ Sumner, Scott B. (2012). "5. How Nominal GDP Targeting Could Have Prevented the Crash of 2008". In Beckworth, David (ed.). Boom and Bust Banking: The Causes and Cures of the Great Recession. Independent Institute. pp. 129–165. ISBN 978-1-59813-076-8.
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