Nominal Anchor

Nominal Anchor

A government policy that provides stability to an economy at the expense of some of that government's autonomy. For example, if a government pegs its currency to another, it reduces the uncertainty in exchange rates but also gives the government less ability to combat inflation or otherwise change the money supply.
References in periodicals archive ?
That said, the peg has provided a stable nominal anchor for the economy, particularly as contracts for the main export, oil, are typically priced in dollars.
Simply put, during the 2010-2011 biennium--the initial expansive phase of the populist strategy monetary, fiscal and incomes policies adopted a very strong expansionary pace, while exchange rate policy operated as a nominal anchor to contain the inflationary pressures.
Second, insofar as foreign governments have pegged their exchange rates to the dollar as has China, the dollar acts as a nominal anchor for their price levels--sometimes in the context of major domestic financial stabilizations.
For both noncontingent nominal financial contracts and nominal price stickiness, it is money's role as a unit of account that is crucial, and in both cases, optimal monetary policy is essentially the choice of a particular nominal anchor that makes money best perform its unit-of-account function.
The report also highlighted the need to use headline CPI inflation as the principal nominal anchor for monetary policy.
I expect the headline CPI to be the nominal anchor," he said.
The mission notes that the exchange rate peg with the Indian rupee serves as a useful nominal anchor, and welcomes the authorities decision to maintain it.
Recognising that inflationary pressures are mounting and determined to establish a nominal anchor which will allow us to preserve the internal value of the rupee, we have raised the repo rate by 25 basis points," RBI governor (http://www.
Nevertheless, the countries' open economies with their easy flow of goods and labour have largely underpinned the fixed exchange rate as a credible nominal anchor.
The quantity theory imputes causality to monetary disturbances based on central bank behavior that flouts the need to provide a nominal anchor and to allow the price system to work.
Hetzel, however, maintains that the remarkable economic performance during most of these years resulted from what he calls the use of an implicit "rule" by the Fed that established a nominal anchor in the form of a low, stable expected inflation rate.
The second is concerned to what extent a tight credit policy (to contain inflationary impact) may provide a nominal anchor under imperfect asset substitutability.