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The importance of level targeting

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I have a new podcast interview with David Beckworth. In the interview I keep bringing up the importance of level targeting. My fear is that the Fed will eventually get there, but fail to announce the policy in advance. Most of the benefit from level targeting comes from the initial announcement effect, not from the subsequent attainment. Tags:

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I have a new podcast interview with David Beckworth. In the interview I keep bringing up the importance of level targeting. My fear is that the Fed will eventually get there, but fail to announce the policy in advance. Most of the benefit from level targeting comes from the initial announcement effect, not from the subsequent attainment.


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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