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When Does an Inflation Target Yield the Second Best?


  • Beetsma, Roel M W J
  • Bovenberg, Lans


It is shown that an inflation target does not establish the second best if the central bank is independent and the government collects seigniorage revenues. To eliminate excessive inflation and ensure that stabilization is efficient, society should combine an optimal inflation target with a central bank that attaches less weight to inflation stabilization than the public does. Copyright 2001 by The editors of the Scandinavian Journal of Economics.

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  • Beetsma, Roel M W J & Bovenberg, Lans, 2001. " When Does an Inflation Target Yield the Second Best?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 119-126, March.
  • Handle: RePEc:bla:scandj:v:103:y:2001:i:1:p:119-26

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    References listed on IDEAS

    1. Larsson, Laura, 2002. "Sick of being unemployed? Interactions between unemployment and sickness insurance in Sweden," Working Paper Series 2002:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Larsson, Laura, 2002. "Sick of Being Unemployed? Interactions Between Unemployment and Sickness Insurance in Sweden," Working Paper Series 2002:5, Uppsala University, Department of Economics.
    3. Cassel, Claes-M. & Johansson, Per & Palme, Mårten, 1996. "A Dynamic Discrete Choice Model of blue Collar Worker Absenteeism in Sweden 1991," SSE/EFI Working Paper Series in Economics and Finance 129, Stockholm School of Economics.
    4. Andersson, Fredrik & Vejsiu, Altin, 2001. "Determinants of plant closures in Swedish manufacturing," Working Paper Series 2001:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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    Cited by:

    1. Francisco Candel-Sánchez & Juan Cristóbal Campoy-Miñarroy, 2004. "Is the Walsh Contract Really Optimal?," Public Choice, Springer, vol. 120(1_2), pages 29-39, July.
    2. Uchida, Hirofumi & Fujiki, Hiroshi, 2005. "Optimal inflation target under uncertainty," Japan and the World Economy, Elsevier, vol. 17(4), pages 470-479, December.

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