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Economic Brief

April 2015, No. 15-04

Nominal GDP: Target or Benchmark?

Robert L. Hetzel

Some observers have argued that the Federal Reserve would best fulfill its mandate by adopting a target for nominal gross domestic product (GDP). Insights from the monetarist tradition suggest that nominal GDP targeting could be destabilizing. However, adopting benchmarks for both nominal and real GDP could offer useful information about when monetary policy is too tight or too loose.

Additional Resources

Christensen, Lars, The Market Monetarist blog,

Friedman, Milton, "The Role of Monetary Policy," American Economic Review, March 1968, vol. 58, no. 1, pp. 1-17.

Goodfriend, Marvin, "Interest Rate Policy and the Inflation Scare Problem: 1979-1992," Federal Reserve Bank of Richmond Economic Quarterly, Winter 1993, vol. 79, pp. 1-23.

McCallum, Bennett T., "The Case for Rules in the Conduct of Monetary Policy: A Concrete Example," Federal Reserve Bank of Richmond Economic Review September/October 1987, vol. 73, pp. 10-18.

Sumner, Scott, "A Market-Driven Nominal GDP Targeting Regime," Mercatus Center at George Mason University Research Paper, July 24, 2013.

Sumner, Scott, The Money Illusion blog,

Woodford, Michael, "Methods of Policy Accommodation at the Interest-Rate Lower Bound," Federal Reserve Bank of Kansas City Economic Policy Symposium Conference Proceedings, 2012, pp. 228-231.

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