Nominal GDP growth targeting Another proposed alternative strategy is nominal GDP growth targeting or, as economists sometimes call it, “speed limit” policy.14 Nominal GDP growth targeting is different from nominal GDP level targeting – as with inflation targeting, past outcomes are not taken into account. Bygones are bygones.
Loosely speaking, the nominal GDP target is the sum of an inflation target and an estimate of potential GDP growth. The central bank tightens policy whenever nominal GDP growth is above this target and loosens when it is below. While theoretical analyses suggest that speed limit 9  See, for example, Svensson (1999), Vestin (2006), Gaspar, Smets and Vestin (2007) and Schmidt (2011).