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Aggregate demand shocks, central bank preferences and macroeconomic outcomes with imperfect information

  • James, Jonathan G.
  • Lawler, Phillip
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    Assuming imperfect information regarding aggregate demand shocks, the paper shows: first, the distribution of the impact of such shocks between employment and prices depends crucially on central bank preferences; second, optimal stabilization is achieved by a conservative central banker.

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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 105 (2009)
    Issue (Month): 3 (December)
    Pages: 208-210

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    Handle: RePEc:eee:ecolet:v:105:y:2009:i:3:p:208-210
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    1. Beetsma, Roel M W J & Jensen, Henrik, 1998. "Inflation Targets and Contracts with Uncertain Central Banker Preferences," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 384-403, August.
    2. Lawler, Phillip, 2000. "Centralised Wage Setting, Inflation Contracts, and the Optimal Choice of Central Banker," Economic Journal, Royal Economic Society, vol. 110(463), pages 559-75, April.
    3. Herrendorf, Berthold & Lockwood, Ben, 1997. "Rogoff's "Conservative" Central Banker Restored," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 476-95, November.
    4. James, Jonathan G. & Lawler, Phillip, 2008. "Aggregate demand shocks, private signals and employment variability: Can better information be harmful?," Economics Letters, Elsevier, vol. 100(1), pages 101-104, July.
    5. Waller, Christopher J, 1992. "The Choice of a Conservative Central Banker in a Multisector Economy," American Economic Review, American Economic Association, vol. 82(4), pages 1006-12, September.
    6. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
    7. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
    8. repec:tpr:qjecon:v:100:y:1985:i:4:p:1169-89 is not listed on IDEAS
    9. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
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