This version might be a bit easier to sell politically too as it doesn’t carry the connotation that the central bank is “limiting” wage growth to a target.

I have a concern about that as well – I wonder how real wage growth-productivity growth would do as a variable.

The one advantage that stems from looking at wages ahead of a CPI index should come from a clearer idea of general price pressures instead of relative price pressures. Of course this assumes that relative prices in the labour market are less variable than in the goods market – is that the case?

Another advantage stems from the fact that we are targeting sticky prices in the economy – which are the ones we are concerned about for inflationary pressures (as the flexible ones are only reacting to relative price movements). As a result, it makes theoretic sense that a sticky price target would be better than a composite flexible-stick target such as the CPI.

However, I think Mankiw builds an index rather than just targeting wages as he realises that there is more to it.