[the] NGDP gap of −4.77 percent indicates that the dollar size of the economy is still significantly smaller than prepandemic expectations. Specifically, the neutral level of NGDP was $22.22 trillion in the third quarter of 2020, whereas actual NGDP came in at $21.16 trillion. That is a shortfall of $1.06 trillion, which is a vast improvement over the previous quarter’s shortfall of $2.57 trillion, but still a sizable hole to fill in the economy. This trillion-dollar hole means that both aggregate spending and income are still falling short of their prepandemic trend levels.
Friday, November 20, 2020
Wednesday, September 2, 2020
I have a new article presenting my take on the Fed's new average inflation target (AIT). It includes an explanation of how it works compared to the Fed's previous inflation target and what it could mean for the recovery. I note that although AIT it is not quite a NGDP level target, it is a step in that direction. Moreover, it could lead other central banks to follow suit. Check it out.
Also, here is an earlier piece I wrote on make-up policy and how it could be best implemented via a NGDP level target. It was published before the big announcement last week.
Finally, here is St. Louis Fed President Jim Bullard's take on AIT. He explains how this new framework gets us fairly close to NGDP level targeting.
Monday, August 10, 2020
Monday, July 6, 2020
Wednesday, June 24, 2020
Officials in the UK Treasury are “probably” considering whether to change the Bank of England’s inflation-targeting mandate due to the massive economic shock imparted by the coronavirus crisis, according to a former minister.
Lord Jim O’Neill, who was commercial secretary to the Treasury in 2015, wants the central bank to shift from its current target of keeping inflation at 2 per cent to targeting a steadily rising trend of nominal UK GDP growth instead.
Lord O’Neill conceded that the idea of moving to nominal GDP targeting would “scare” many people in the Treasury and the Bank who regard the current inflation-targeting regime as a proven success.
Thursday, June 11, 2020
Tuesday, May 26, 2020
Summary of the NGDP Gap
Extension I: Blue Chip Forecast Version
Extension II: Precision Version