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![• F.A. Hayek
•“Any change in the velocity of circulation would
have to be compensated by reciprocal change
in the amount of money in circulation if money
is to remain neutral…” (1935).
• Milton Friedman
•“[T]he Fed must see to it that the quantity of
money changes in such a way as to offset
movements in velocity...” (2003).](https://image.slidesharecdn.com/ngdptarget2feb-160226162737/85/Nominal-GDP-Targeting-10-320.jpg)
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Nominal GDP Targeting
This document discusses the advantages of targeting the growth rate of the money supply rather than interest rates. It lists advantages as not needing to know the money supply, inflation becoming less sensitive to short-run changes, monetary policy becoming more predictable, and less need to consider the real economy. The document also cites F.A. Hayek and Milton Friedman discussing how the money supply must change to offset movements in velocity to maintain monetary neutrality.
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Nominal GDP Targeting
- 6. Advantage Don’t need to knowMoney Supply Advantage Don’t need to worry about short-run changes to inflation Advantage Monetary policy becomes more predictable Advantage Don’t need to worry about real economy
- 10. • F.A. Hayek •“Anychange in the velocity of circulation would have to be compensated by reciprocal change in the amount of money in circulation if money is to remain neutral…” (1935). • Milton Friedman •“[T]he Fed must see to it that the quantity of money changes in such a way as to offset movements in velocity...” (2003).