Should central banks focus on ‘inflation targeting’ or nominal GDP?

AmBank Group chief economist Anthony Dass(pic), who is projecting a 4.5% GDP growth this year for Malaysia, said the economic growth hinges largely on domestic demand and private investment. To this end, he told StarBiz it is imperative for the government to arrest the alarming decline in private-sector investments which has slid from 6.9% in the third quarter of last year (3Q18) to 0.4% in 1Q19.

IN general, economists have made considerable progress in understanding the role of central banks in addressing inflation.

Until at least in the early 1970s, the majority of economists felt that central banks were able to do little to control inflation. Conventional wisdom indicated that monetary policy was relatively ineffective to control inflation or even stabilise the economy.