VOX  CEPR Policy Portal

Among the possible options for an alternative monetary policy framework to achieve price stability more firmly in the low neutral interest rate environment are nominal GDP targeting and nominal wage targeting. This column, the second in a two-part series focusing on Japan, argues that while nominal GDP and nominal wage targeting might be easier for the public to understand than an inflation target, nominal GDP targeting appears to have limited impact and nominal wage targeting may be difficult to implement anytime soon in Japan due to uncertainty over labour productivity growth and the complicated wage-setting structure.