My ASI proposal discussed NGDP targets within the context of wider reforms. I viewed an NGDP target as a step in the right direction away from arbitrary and discretionary monetary policy decisions, and toward a more automated, rule-based system. Some important additional elements relating to implementation included:
- It places a focus on monetary base (which, ultimately, is all that the CB controls)
- It makes open market operations (OMO) the routine monetary policy tool (rather than interest rates)
- It can strip away a lot of distortionary CB activity
- It uses forecasts and market expectations (possibly through futures contracts) rather than historic data
- It can be tied to some automatic mechanism, become a rule, and eliminates discretion entirely