Small economies need to really have something going for them to be notable. Singapore has its world-beating port, Hong Kong is the gateway to China, and Qatar grew rich on oil and gas. New Zealand owes its place in history to something less glamorous but of great significance: inflation targeting. Too bad this totem of modern policymaking has become a political football in the land of its birth.

New Zealand earned its special place in the annals of monetary policy by becoming the first to set a formal goal for the pace of price increases. Lots of countries subsequently thought it was a good idea and began introducing similar objectives for inflation, usually in the vicinity of 2%. Having such an aspiration became a mark of respectability. Even the Federal Reserve paid heed: In the mid-1990s, when the Fed debated how to put a number on price stability and whether to enunciate it, New Zealand was a key reference.

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