Of course nominal GDP growth is the sum of inflation and real GDP growth. In most countries, including the U.S. and Canada, real GDP growth has been remarkably stable on average over long periods of time. Of course, it varies over the business cycle.
So if we picked, say, a 5% nominal GDP target, we would have had about 3% real growth and about 2% inflation over a period of many decades—maybe even a century. There are ways of adjusting that for demographics that I won't get into here.
But I would also point to the fact that even if it didn't work perfectly, that flexibility really could help in certain situations. I would point to Australia as a country Canada might look at. By the strict inflation targeting criteria, it hasn't done quite as well as Canada, but that also gave them more flexibility and they didn't fall into the liquidity trap, partly because of slightly higher inflation than nominal GDP growth.
Yet Australia would still be viewed as a country that would have fairly good performance on price stability and was able to almost completely avoid the recession this time around. Now, of course there are differences between the countries, but I think that would point to an example of a country that's somewhat similar to Canada in terms of its industry mix, and also was able to do somewhat better by being a little bit more aggressive on nominal GDP growth during this recession.
But again, long-term real GDP growth is remarkably stable, and if there are demographic shifts, that can be built into the model. If you do that, you're going to have some year-to-year fluctuation in inflation, but you're going to come very close to that average inflation rate you're looking for.