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

  • James, Jonathan G.
  • Lawler, Phillip
Registered author(s):

    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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    File URL: http://www.sciencedirect.com/science/article/B6V84-4X08795-1/2/5eadc1b14e3d8f1bd550b376cb3de7ee
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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
    Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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    1. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
    2. Beetsma, Roel & Jensen, Henrik, 1997. "Inflation Targets and Contracts with Uncertain Central Banker Preferences," CEPR Discussion Papers 1562, C.E.P.R. Discussion Papers.
    3. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
    4. 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.
    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. 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.
    7. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
    8. Herrendorf, Berthold & Lockwood, Ben, 1996. "Rogoff's 'Conservative' Central Banker Restored," CEPR Discussion Papers 1386, C.E.P.R. Discussion Papers.
    9. 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.
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