Indeed, this evolution has gone so far that the actual practice of monetary policy by inflation-targeting central banks now closely resembles the practice of those central banks, such as the European Central Bank, the Bank of Japan, and the Federal Reserve, that have not chosen to adopt that paradigm.
At the centre of this debate is the question of how to raise potential output growth, which has slowed from around 2% in OECD countries in 2000 to around 1% today.1 Without stronger potential growth, the cyclical recovery we are now seeing globally will ultimately converge downwards to those slower growth rates.