In one of these earlier papers (McCallum, 1984), I proposed in qualitative terms a rule that respects all four of these principles. My proposal began with the specification of a target path for nominal GNP that grows evenly at a prespecified rate that equals the economy’s prevailing long-term average rate of real output growth. For the United States the appropriate figure is about 3 percent per year. Since this magnitude will be virtually independent of monetary policy over any extended period (say, 20 years or more), keeping nominal GNP growth at the appropriate value-henceforth assumed to be 3 percent per yearlz-should yield approximately zero inflation over any such period. Furthermore, the prevention of fluctuations in nominal GNP growth should help to prevent swings of real output from its trend path. l3 While some output fluctuations would continue to occur even with a perfectly smooth growth path for nominal demand, they would probably be as small as can feasibly be obtained, given the absence of a reliable Phillips curve model.
Bennett T. McCallum, an economist, makes the case for a consistent 3% growth of NGDP. Doing this requires a loss function in the currency issuer market matching. The bit error will grow by 3% a yuear, by rule locked into the currency spreadsheet function.
This should work, but we get an insurance function for member banks so member banking need be priced entry and exit. No NGDP targeting for government licensed peermanent member banks work.
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