The Interaction Between Labor Market Policy and Monetary Policy: An Analysis of Time Inconsistency Problems
2002 (English)Report (Other academic)
This paper studies the interaction between time inconsistency problems in labor market policy and monetary policy. When both policies are discretionary, there is a positive inflation bias, whereas the bias market programs may be either positive or negative. A commitment of labor market programs to zero increases inflation, as compared to the case when both labor market policy and monetary policy are discretionary. Delegation of labor market policy to a liberal labor market board may improve the discretionary outcome, even if labor market programs crowd out regular employment. A conservative central bank always reduces the social loss, even when monetary policy interacts with labor market policy.
Place, publisher, year, edition, pages
Stockholm: IIES , 2002. , 43 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University. (Online), ISSN 1653-610X ; 708
IdentifiersURN: urn:nbn:se:su:diva-42023OAI: oai:DiVA.org:su-42023DiVA: diva2:343724