ABSTRACT
Chapter 6 discusses the 2008 financial crisis in the context of nominal income targeting and why the Federal Reserve reacted the way it did. It focuses on the large picture and how some unconventional policy decisions made the crisis worse than should have been if the Federal Reserve were targeting NGDP or a similar nominal income variable. A deviation from monetary equilibrium also explains why there was a housing bubble in the first place. This bubble, however, cannot be explained without taking into consideration regulation and political behaviors in place in the years prior to the crisis.
