Source: EconLog
by Cameron Harwick
“Most central banks around the world have a price stability mandate, and since the international monetary system regained its footing on a fiat basis after the inflations of the 1970s, that is mostly understood to mean a low inflation target. Over the past couple decades though, a growing number of economists have suggested instead an NGDP target. In George Selgin’s classic formulation, just like we expect prices of particular goods to fall if that industry becomes more productive, the price level should track changes in aggregate productivity, because this minimizes the total number of prices that have to change. What I want to argue here is that, not only is the price level the wrong target for monetary policy, it’s also a needlessly fuzzy target compared to feasible alternatives like NGDP.” (01/09/25)
https://www.econlib.org/hitting-the-right-target-with-monetary-policy/