I like the idea of NGDP targeting but it still needs to be symmetric - both under and over-shoots are corrected for.
My other big issue with NGDP targeting is what forecast of NGDP to target? You can set up a futures market but there is no doubt in my mind it'd be gamed by Wall St. with an agenda. Economist forecasts are basically useless.
Even if it were to occur isn’t the Fed then obligated to engineer an inflation “undershoot” per the AIT framework?
If inflation hit 12%, the "undershoot" would have to last a long time!
So if the Fed makes a policy error it’s solution will be to change its framework?
Such a massive failure would certainly discredit it. What to put in place? I "vote" for NGDP Level Target.
I like the idea of NGDP targeting but it still needs to be symmetric - both under and over-shoots are corrected for.
My other big issue with NGDP targeting is what forecast of NGDP to target? You can set up a futures market but there is no doubt in my mind it'd be gamed by Wall St. with an agenda. Economist forecasts are basically useless.
NGDP targeting also needs to take our demographic reality into account. 3.5-4% is probably the right level based on what we know about the future.
"Leave demography out"! https://marcusnunes.substack.com/p/inflation-is-not-a-monetary-phenomenon