Tuesday, June 18, 2013

It's Time for the Bank of England to Adopt a NGDPLT

Evan Soltas is right. Mark Carney's arrival provides a great opportunity for monetary regime change at the Bank of England:
Mark Carney's arrival as the new head of the Bank of England on July 1 is an opportunity for the U.K. to rethink monetary policy. As a Canadian, Carney is an outsider, and he'll have a clean slate because the central bank’s two current deputy governors are leaving as well. I'm hoping the U.K. seizes the moment and embraces an idea that Carney has flirted with in recent speeches -- adopt an explicit target for nominal gross domestic product.
The Bank of England adopting a NGDP level target (NGDPLT) would be a great catalyst for other central banks considering a move to NGDPLT. The Fed is halfway there with its QE3 program and Japan's Abenomics program is not too far behind. Just like the Bank of New Zealand and the Bank of Canada were important first movers toward inflation targeting regimes, the Bank of England may be the important first mover toward a world where NGDPLT is the norm. 

As the Eurozone crisis has so vividly demonstrated, it is well past time we leave the barbaric practice of inflation targeting behind and move on to a more humane monetary policy regime of NGDPLT.


  1. So what is the transmission mechanism for a central bank to achieve a certain level of NGDP when it is already at the zero lower bound??

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