Thursday, May 30, 2019

Is the UK switching to an NGDP monetary system?

The UK  Office of National Statistics has recently announced that they would publish monthly reports on current GDP levels in their economy. Any monetary regime that has an NGDP component won't make a big monetary difference in normal time, but for crises this can be crucial to avoiding situations such as the Great Depression. You can get much more information from a monthly GDP report which would ignore supply side inflation. This can be used as a tool for not accidentally contracting the money supply when nominal GDP is rapidly falling. In 08 monthly GDP reports from June to December would have shed light on the upcoming recessions and the Fed may if been able to ease the money supply sooner. It'll will be interesting to see this play out in the next economic downturn along with the increasing willingness for central banks to pursue quantitative easing.

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