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| Author: | Lockwood, B. Miller, M. Zhang, L. |
| Title: | Designing monetary policy when unemployment persists |
| Journal: | Economica
1998 : AUG, VOL. 65:259, p. 327-346 |
| Index terms: | UNEMPLOYMENT MONETARY POLICY ECONOMICS |
| Language: | eng |
| Abstract: | This paper investigates how unemployment persistence allows the optimal delegation of monetary policy to an independent entral banker (CB). Two opposing forces are shown to be at work: with more persistence, the government's incentive to stabilize the economy is greater, but (if the CS is forward-looking) its incentive to create inflation surprises is also greater. The authors show that, owing to the second effect, the government may wish not to delegate at all, unlike the case when there is no persistence. |
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