But bad monetary policy, if sustained, will prevent the economy from reaching its maximum growth rate. In this context, ongoing bad monetary policy will reduce growth below its maximum rate over a period of many years, leading to a permanent loss of output. Clearly, bad monetary policy, or the inadequate implementation of policy within the current framework, is something we want to avoid. 3.
Accounting for growth  Determining what our potential level of output is, and what the growth in potential output is, are important issues in implementing good monetary policy. As we will see, potential GDP changes over time. We will look at what drives these changes.