Nominal Income Targeting: A Critical Evaluation

October 1, 1991

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Format: Chicago

Victor E. Argy Nominal Income Targeting: A Critical Evaluation, (USA: International Monetary Fund, 1991) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper evaluates the proposal that government authorities ought to target nominal income. It begins by viewing the literature in some detail. It then undertakes a theoretical analysis of the proposal first for the small country and next for the large country. There is then a general discussion of various issues posed by nominal income targeting. Finally, the paper summarizes the empirical work to date. We show that traditional theoretical analysis tends to be too simple and overly biased in favor of nominal income targeting. When more realistic assumptions are made or econometric simulations are undertaken the case for nominal income targeting is substantially weakened but not, however, destroyed.

Subject: Demand for money, Financial services, Foreign exchange, Monetary base, Money, National accounts, Personal income, Real exchange rates, Real interest rates, Wages

Keywords: Demand for money, Exchange rate, Fiscal policy, Global, Income target, Monetary base, Monetary policy, Money stock, Nominal income, Personal income, Price level, Real exchange rates, Real interest rates, WP

Publication Details

Pages:

114
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1991/092
Stock No:

WPIEA0921991
ISBN:

9781451851557
ISSN:

1018-5941

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