Varför nominell BNP?
Here’s the right (or a better) way to ask the question: Suppose every decade Nature tosses a coin. If she throws heads she increases productivity growth rate. If she throws tails she decreases productivity growth rate. How should the Bank of Canada respond? Should it keep inflation constant (adjust the implied NGDP growth rate target every decade)? Or should it keep NGDP growth constant (adjust the implied inflation target every decade)?
That’s a real question about the choice between two different monetary policies.
Via The Money Illusion.