NGDP target can create ‘divine coincidence’ – Bullard and Singh

Nominal GDP targeting can “repair” distortions from credit market frictions, authors find

James Bullard
Federal Reserve Bank of St Louis president James Bullard
Tom Campbell

Nominal GDP targeting can “repair” the distortions from credit market frictions, creating a “divine coincidence”, say James Bullard and Aarti Singh.

The Federal Reserve Bank of St Louis president and the University of Sydney academic outline a model featuring “considerable income inequality”, which generates a “large” private-sector credit market. Households can draw on credit and adjust their labour supply in response to shocks – as such, labour supply is endogenous and heterogeneous.

The

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