Saturday, March 24, 2012

Per Capita Nominal GDP Targeting

Market monetarists generally favor a monetary regime that keeps some measure of nominal spending on output growing at a slow steady rate. Keeping nominal GDP growing at a slow stead rate is the most common approach. However, there are occasional mentions of per capita nominal GDP or even nominal GDP per member of the working age population.

The basic idea is that if there are more people, and in particular, a larger labor force, then the productive capacity of the economy will be larger, and so more spending on output would be appropriate. Or, alternatively, with a larger population, and in

particular, a larger labor force, keeping nominal income per worker growing at a slow, steady rate will be more consistent with maintaining full employment of labor.

Per capita nominal GDP is relatively easy to construct. It is also possible to calculate nominal GDP for the civilian eligible population, which is everyone over 16, not in the military, prison, nursing homes, or hospitals. Unfortunately, that includes all retirees. Still, it is possible to get the eligible population between 20 and 64. I had to add up the 20-24, 25-54, and 55-64 groups to find it. So, I found nominal GDP per person 25-54 too.

The trend growth rate for nominal GDP is 5.4% from 1985 to 2008. For all of the rest, the trend growth rates are very similar. For per capita GDP is is 4.26% and for the others it is 4.19%. It is hard to see much difference, though presumably, the reason to go with one of the other figures is to be prepared large shifts in the total population or shifts in the age composition of the population.


  1. Sometimes people try to defend Japan's pathetic performance of the last 20 by blaming demographics, and a shrinking labor force.

    Of course, it is true, a smaller labor force (all thing being equal) means a smaller GDP.

    But the size of the labor force is flexible, I contend, especially in modern economies. People from 65 to 75 probably can still hold down office work, if necessary or if they want to. Women can work, or not.

    Anyways, all the trend lines shown by Woolsey suggest an economy badly underperforming trend.

    The Fed (and ECB and BoJ) need to print a lot more money. And yes, balance fiscal budgets and look for structural reforms.

    Greek railway workers need not retire at 50, or uniformed U.S. federal military employees at age 40.

  2. We definitely need to keep eye on the GDP; it’s one of the most important factors to look at. I never worry too much over it because of broker like OctaFX, as they are very special been regulated plus a true ECN as well while they have even won the award for the same, so that’s why trading with them is dreamlike. I never have to worry using their daily market news and analysis service, it’s top notch and highly dependable, so makes work a lot easier for me!