Saturday, June 18, 2011

For Scott Sumner

"What should the Fed be doing? The type of announcement I would like to see would state the target of monetary policy in terms of a path of nominal GNP...What we can promise through the use of a sensible long-run monetary policy is...to use monetary instruments to keep nominal GNP growth at a reasonably high level, that is, not undergo sharp recession, and yet, reduce this growth gradually to a non-inflationary level...We shouldn't be afraid of money growth, if the reason we need it is growth in real GNP...We can get out of the box by announcing a nominal GNP target instead of a money growth target. So far, the (Reagan) administration's position has been incomplete in this area."

Robert Hall as published in his essay "The Reagan Economic Plan," in Supply-Side Economics: A Critical Appraisal (1982).

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