August 5, 2018

Sunday remininses: John Taylor on NGDP Level Targeting

In the first edition of his Macroeconomics textbook (1986), on page 137, we read: The underlying objective of policy is to maintain a steady or stable level of aggregate demand. The importance of a stable aggregate demand is one that has been recognized by most economists since the 1930s. Even economists who normally differ on other issues agree on the principle that it is desirable to maintain a stable growth of aggregate demand. The chart below is a replica of his chart (pg 136), discussing the appropriate response to an aggregate demand shock, induced by a rise in money demand… Read More