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Macro Musings with David Beckworth
Evan Koenig on the Case for Nominal GDP Targeting
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.
51:38
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Quick takeaways
- Nominal GDP targeting emphasizes the importance of stable nominal income paths to help individuals meet fixed financial obligations.
- The Fed's prior framework reviews overlooked nominal GDP targeting, illustrating a need for broader evaluations of monetary policy strategies and their economic implications.
Deep dives
Understanding Nominal GDP Targeting
Nominal GDP targeting involves setting a predetermined target for a measure of nominal spending, such as nominal Gross Domestic Product (GDP) or gross nominal income. This approach can utilize various spending or income aggregates and potentially weighs price and output differently depending on the context. The speaker describes his personal journey into this concept, emphasizing that fixed nominal obligations dictate the importance of stable nominal income rather than just focusing on price stability. He formalized his understanding of this issue through research, arguing that predictable nominal income paths benefit individuals by ensuring they can meet their fixed obligations.
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