Macro Musings with David Beckworth Evan Koenig on the Case for Nominal GDP Targeting
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Feb 24, 2025 Evan Koenig, a former senior aide at the Dallas Fed, dives deep into nominal GDP targeting and its potential to reshape monetary policy. He reveals why the Fed hasn't seriously considered this approach and how it could provide greater clarity to the public. Koenig discusses the practical applications of NGDP targeting and its compatibility with the Fed’s goals of employment and price stability. The conversation also touches on the implications of this strategy following COVID-19 and its role in fostering economic stability in turbulent times.
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NGDP Targeting Defined
- Nominal GDP (NGDP) targeting involves setting a target for overall nominal spending or income growth.
- This can be achieved by targeting nominal GDP, income, or consumption expenditures.
Koenig's NGDP Journey
- Evan Koenig's interest in NGDP targeting stemmed from discussions about inflation targeting in the late 1980s.
- His personal experience with a mortgage led him to realize the importance of stable nominal income.
Fed Review's Limitations
- The 2019-2020 Fed review had a narrow focus on demand shocks and specific models.
- It overlooked other nominal frictions like fixed debt obligations and wage stickiness.