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The Interaction Between Labor Market Policy and Monetary Policy: An Analysis of Time Inconsistency Problems
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
2002 (English)Report (Other academic)
Abstract [en]

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
National Category
URN: urn:nbn:se:su:diva-42023OAI: diva2:343724
Available from: 2010-08-16 Created: 2010-08-16 Last updated: 2010-08-16Bibliographically approved

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