How to implement an NGDP targeting regime - Bill Niskanen style

How to implement an NGDP targeting regime - Bill Niskanen style
Market Montarists are tireless in arguing in favour of NGDP level targeting. However, we normally do not spend much time on how such a target should practically be implemented. Scott Sumner obviously has argued that an NGDP target should be implemented with the use of NGDP futures. I love Scott's suggestion, but it might not convince everybody and it might therefore be worthwhile looking at other possibilities. Bill Niskanen for nearly two decades until he passed away last year was a proponent of what he called a demand rule. Niskanen's suggestion was that the Federal Reserve should target what is called “final sales to domestic purchasers” (FSDP). This aggregate is equal to NGDP minus the change in private inventories minus exports plus imports. In reality the difference between FSDP and NGDP targeting is very small. Therefore, Niskanen effectively was an NGDP  level proponent. In his first paper on the demand rule - Political Guidance for Monetary Policy - Niskanen also had a suggestion for a demand rule could be implemented practically in the US. Maybe Niskanen's 20 year old suggestions could inspire US lawmakers. Here is Niskanen's suggestion for institution reform (and sorry for the lengthy quote):    


WORLD LEADING ADVISORY SPECIALISING IN THIS TOPIC

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