Understanding Nominal GNP Targeting
Michael D. Bradley and Dennis W. Jansen analyze nominal income targeting from both a theoretical and a practical standpoint. The authors illustrate several desirable features of nominal income targeting, among which is its ability to stabilize output, in a simple macroeconomic model. Bradley and Jansen point out, however, that ignorance of the correct equations, parameter values, and lag structure that characterize the U.S. economy sharply reduces the appeal of any monetary policy procedures, including nominal income targeting, that requires responding to the current state of the economy.