I am excited to announce that today is our hard launch for the 'NGDP Gap' series. It is a cross-check measure on the stance of countercyclical macroeconomic policy from @mercatus (1/n) 
The basic idea behind it is that households and businesses make plans based on their forecasts of nominal income. Deviations from those forecasts are be disruptive, since it is often challenging to quickly rewrite fixed-price nominal contracts. (2/n)
Consequently, we construct a 'neutral' nominal income or NGDP level based on publicly available forecasts. The % difference between neutral NGDP level & actual NGDP level is the NGDP Gap. We outline details of its construction in this policy brief mercatus.org/system/files/b… (3/n)
We show in the brief that the NGDP Gap can be motivated from the standard New Keynesian framework as well as ... (4/n)
...a more Monetarist's framework (note: the velocity gap and money supply gap = NGDP Gap)... (5/n)
The NGDP Gap also is consistent with a financial stability view. This, IMHO, is one of the more underappreciated points about NGDP as I show in this earlier paper cato.org/sites/cato.org… (6/n)
The beauty of the NGDP Gap is that it does not rely on unobservable measure like r* and u*, but on publicly available forecasts. We will be updating the measure and making it available on this webpage. Check out the NGDP Gap chart while you are there.(7/n) mercatus.org/publications/m…
We will also be issuing quarterly reports when new NGDP data is released at this webpage. And yes, we address the NGDP data revision problem. (8/n) mercatus.org/publications/m…
To reiterate, this is a cross-check measure. Its use does not require or assume the adoption of a NGDP target. We hope you find it useful. (end)
Addendum: the NGDP Gap could be very useful in guiding the actions of Congress and the Fed in the COVID-19 relief efforts:
