Nominal Income Targeting: A Critical Evaluation

Victor Argy

No 1991/092, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; money stock; exchange rate; monetary policy; nominal income; income target; fiscal policy; price level; Personal income; Real interest rates; Real exchange rates; Monetary base; Demand for money; Global (search for similar items in EconPapers)
Pages: 114
Date: 1991-10-01
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1991/092

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