The Alleged Instability of Nominal Income Targeting
Recently it has been argued that a monetary policy of nominal income and targeting" would result in dynamically unstable processes for output and inflation. That results holds in a" theoretical model that includes backward-looking IS an Phillips curve relations rather special and theoretically unattractive. The present paper demonstrates that replacement of" the special Phillips curve with one of several more plausible specifications overturns the" instability result, whether or not the IS equation is replaced with a forward-looking version. " Thus the instability result is quire fragile and therefore provides almost no basis for a negative" judgment regarding nominal income targeting.
Published as "Nominal Income Targeting in an Open-Economy Optimizing Model", Journal of Monetary Economics, Vol. 43, no. 3 (June 1999): 553-578.