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

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.


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