Are there any practical limits to the quantity of assets a central banks may own?
How does your theory reconcile/account for the stagflation of the 1970s?
Do you think that sticking to a NGDP target might cause inflationary expectations to become unanchored?
If the BOJ cancels/monetizes the JGBs what will happen?
More broadly do you see limits to NGDP targeting if so what are they.
"Karl, There may be legal limits to what central banks can own, but they are not a factor for the US, at least in recent years. It may not be desirable for the central bank to have a very large balance sheet. This issue would play a role in determining the optimal NGDP growth rate.
The stagflation of the 1970s was mostly caused by rapid growth in the monetary base. As NGDP growth rose to about 11 percent a year, velocity also picked up a bit. RGDP grew at roughly the trend rate of 3 percent, while inflation was close to 8 percent.
With NGDP targeting, inflation expectations will move inversely to long run trend changes in RGDP growth. Those changes are likely to be small.
The effect of BOJ monetization of bonds is complicated. The faster the inflation/NGDP target path, the more likely that monetization would caused inflation to overshoot their target.
I don’t see technical limits to NGDP targeting, But the policy is less desirable when total labor compensation doesn’t closely track NGDP."