Central banks conventionally use various tools to try to stabilize the average prices of consumer goods.  The Fed, in particular, attempts to keep price inflation at about 2% per year.  Reliably low and stable inflation allows markets to set prices in dollar terms without having to worry about changes in the general purchasing power of the dollar.

Nominal GDP level targeting is a monetary policy alternative to inflation targeting that stabilizes the total amount of money being spent on the economy's products.  This allows the purchasing power of the dollar to adjust in response to changes in the level of economic output.  In other words, if there's more (less) total stuff to buy, then each individual dollar buys more (less).

But how does NGDP targeting compare to inflation targeting in facilitating the smooth operation of the economy?  NGDP targeting expert George Selgin will be joining us to discuss.

George Selgin is the director of the Center for Monetary and Financial Alternatives at the Cato Institute.  He has written widely on the topics of monetary theory, monetary policy, and free banking.

The reading for this week is a 2018 blog post by Selgin entitled "Some 'Serious' Theoretical Writings That Favor NGDP Targeting."

It provides a nice jumping-off point for digging further into the topic.

Previous related Boston Basic Income topics have included:
BBI #84: Deflation
BBI #88: Recessions
BBI #131: Fiscal vs Monetary Policy

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