‘The Meaning of Internal Balance’ Thirty Years On

Abstract

In his Nobel Prize lecture, Meade advocated allocating demand management policies to pursuing price stability, reformed wage‐fixing institutions to achieving full employment and foreign exchange policies to maintaining balance‐of‐payments equilibrium. But with respect to the first, he advocated a target for nominal income rather than the price level. I evaluate Meade’s programme with the benefit of hindsight and in the light of experience with inflation targets. I also discuss some of the issues associated with the application of flexible inflation targets, as well as the extent to which financial stability considerations should affect the conduct of monetary policy.

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