The effects on the dollar would be the same. At the moment the Reserve Bank targets inflation.
If expectations about inflation exceed the limit, 1,5% to 2% if I am not mistaken, the Fed signals that is going to tighten their policy and if it falls below 1,5% to 2% it signals that is going to loosen it.
With NGDP targeting, if nominal GDP falls bellow the historical norm the Fed would start loosening their policy and if it goes above it would start tightening it. And here we must remember that NGDP is real GDP + inflation. ( about 2.5% to 3% of real growth plus 1,5% to 2% inflation).
The advantage is that in a downturn GDP tends to contract before inflation looses steam and that would allow the Fed to intervene earlier.
As to the value of the dollar in terms of the other currencies one has to realize that the Fed tends only to intervene in order to avoid excessive appreciation or depreciation of the dollar and that all necessary adjustments derived from trade issues would be equally left to the exchange rate mechanism to deal with.
Paul Samuelson said once that Milton Friedman who sat on the board of the Fed wanted it to be run by a computer and that is basically the idea. Set a target of 5% nominal growth and let the money supply grow accordingly.
FML Price at posting:
5.3¢ Sentiment: Hold Disclosure: Not Held
