Flexible inflation targeting vs nominal GDP targeting in the euro area

Christophe Blot (1) , Jérôme Creel (1) , Xavier Ragot (1, 2)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)
2 ECON - Département d'économie (Sciences Po)

We assess the pros and cons of nominal GDP targeting vis-à-vis flexible inflation targeting regime. We show that the benefit of a regime shift towards nominal GDP targeting in the euro area might be small. Moreover, nominal GDP targeting is not concerned with financial stability. Finally, targeting nominal GDP would make ECB communication very difficult. If the aim of a regime shift were to bring the ECB to pay more attention to growth, it would be more straightforward to fix a dual mandate and to set an explicit target for real output growth or the unemployment rate.

Domaines: Economies et finances

Christophe Blot, Jérôme Creel, Xavier Ragot. Flexible inflation targeting vs nominal GDP targeting in the euro area. [Research Report] European Parliament. 2015, pp.45 - 64. ⟨hal-03429880⟩