Nominal Income Targeting : A Critical Evaluation

Author/Editor:

Victor E. Argy

Publication Date:

October 1, 1991

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.

Series:

Working Paper No. 91/92

Subject:

English

Publication Date:

October 1, 1991

ISBN/ISSN:

9781451851557/1018-5941

Stock No:

WPIEA0921991

Format:

Paper

Pages:

114

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