A "Working" Solution to the Question of Nominal GDP Targeting

Although a number of economists have tried to revive the idea of nominal GDP targeting since the financial market collapse of 2008, relatively little has been offered in terms of a specific framework for how this objective might be achieved in practice. In this paper we adopt a strategy outlined by Holbrook Working (1923) and employed, with only minor modifications, by Hallman, et al. (1991) in the P-Star model. We then present a series of theoretical and empirical results to show that Divisia monetary aggregates can be controlled by the Federal Reserve and that the trend velocities of these aggregates, by virtue of the properties of superlative indexes, exhibit the stability required to make long-run targeting feasible.