Britmouse wants the UK to adopt a nominal GDP target. There's nothing cranky, partisan or new about this; Sam Brittan advocated it in the 80s and the IPPR in the 90s. However, I'm not sure it would make much difference. Here are some pros and cons.

Pro: It would permit a looser monetary policy than inflation targeting. For example, a 5% NGDP target would mean targeting 4% inflation if real GDP looks like growing just 1%.

C0n: The very fact that inflation has consistently overshot its target suggests that the Bank of England has been running a looser policy anyway. It could be a closet NGDP targeter.

Pro: The 2009 recession was an NGDP recession; it fell by 4.8% between its peak and trough. An NGDP target would thus have prevented the recession.

Con: No. The problem in 2009 wasn't so much that policy was too tight but that the Bank's GDP forecasts were too optimistic. For example, in August 2008 it was forecasting that real GDP would grow 0.6% in the following four quarters, but in fact it dropped 3.7%. Had the Bank's forecasts been more accurate, it would have run a looser policy even with an inflation target. An NGDP target would not solve the problem that forecasts are inaccurate.

Pro: An NGDP target would raise inflation expectations and so encourage people to spend rather than to hoard cash paying strongly negative real interest rates.

Con: But the public's inflation expectations have been above 2% for a long time, without unleashing great spending growth. There are many other things restraining spending that are more important than expected real interest rates.

In fact, there's a danger that higher inflation expectations might constrain growth, if they cause gilt yields and borrowing costs to rise.

Pro: Our economic problem is a nominal one and therefore the solution is nominal.

Con: Really? Are real factors such as a lack of investment opportunities, falling productivity growth and a mismatch between supply and demand really unimportant? And to the extent that our problem is a nominal one, it lies in the fact that banks are not creating money by lending. As Adam Posen said, fixing the banks is therefore a priority - more, I'd add, than tweaking monetary policy targets.

Now, I do not say this to suggest that an NGDP target would be a bad thing. Instead, I regard as a member of that very large set of policies that might not make very much difference.