As a side note, I’d also point out that a number of the articles currently supporting NGDP targeting, eg:

http://www.kansascityfed.org/publicat/sympos/2012/mw.pdf?sm=jh083112-4

Are doing so in the context of needing a “credible commitment” to deal with the issue of interest rates being pinned to the zero lower bound in a number of countries. It is a form of communication that can be used in a specific circumstance, rather than the policy rule that should be used over an economic cycle.

If we are solely to focus on optimal monetary policy settings, I am not viciously against NGDP targeting in any sense.

My willingness to look past inflation targeting in a practical sense came about when I was studying, after reading Mankiw discussing wage growth targeting:

http://scholar.harvard.edu/mankiw/files/target.pdf

In this piece he accepted inflation tageting, and it has been widely discussed on the net that Hall and Mankiw had discussed targeting the level of nominal income as an alternative, and potentially superior, target in the early 1990s:

http://www.nber.org/chapters/c8329.pdf

This is all well and good. However, given the mainstream view of “why” we target inflation, and how this improves outcomes, NGDP level targeting has some undesirable properties relative to targeting growth in “slow to adjust” prices.

One of the key examples is a negative supply shock – such as the increase in imported good prices mentioned above. A lift in imported good prices, even without any market failures, should lead to lower output. If we targeted the level of NGDP instead of growth, then the monetary policy rule increases the variability in prices and output, worsening outcomes relative to a price growth rule.

Now while I can live with NGDP targeting (although I do not believe it is the optimal policy rule for a small open economy), my issue with this sort of talk is that politicians are trying to lay the blame for “imbalances” on the central bank – when these have nothing to do with the monetary policy regime (which is a cyclical issue). In truth, policy makers are making the RBNZ a straw man for other failures – a view that can only lead to worse policy outcomes.