Scott Sumner and Ethan Roberts have recently released a primer on nominal GDP targeting, a policy that would certainly improve the current monetary status quo. Instead of targeting inflation (as most central banks do nowadays), Sumner and Roberts propose stabilizing nominal GDP (NGDP) to smooth business cycles and cope with aggregate demand shocks. This would be achieved by creating a NGDP futures market through which central banks would control the path of total nominal spending. Whether you agree or not with their proposal, the paper is worth a reading.

PS, If you are interested in monetary economics, check out Scott Sumner’s blog. He posts really good stuff.