How likely is it that everyone will have exactly the same expectations regarding NGDP growth?
2. Even if it were true, that would mean everyone thought the monetary base was at a level where on target NGDP growth would result. In that case you don’t need any public participation, you would be expected to get on target growth with the existing monetary base. Now of course it is much more likely that people will at some point come to believe the monetary base is too low or two high to produce on target NGDP growth. When that perception develops then people will start buying and selling NGDP futures–as required by the policy. Of course in the real world people have heterogeneous views of velocity. For the purposes of this example define velocity as next year’s NGDP over this years monetary base. Futures market participants will have different estimates of that ratio, and like in any other market it is differences of opinion that leads to trades. The reason I thought you guys don’t understand auction-style markets, is that the arguments you used would seem to apply equally well to
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