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Monetary Regimes: Is There a Trade-Off Between Consumption and Employment Variability?

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Listed:
  • Matthews, Kent
  • Meenagh, David
  • Minford, Patrick
  • Webb, Bruce

Abstract

Macro models generally assume away heterogeneous welfare in assessing policies. We investigate here within two aggregative models - one with a representative agent, the other a long-used forecasting model of the UK - whether allowing for differences in welfare functions (specifically between those in continuous employment and those with frequent unemployment spells) alters the rankings of monetary policies. We find that it does but that a set of policies (money supply targeting implemented by money supply control) can be found that are robust in the sense of avoiding very poor outcomes for either of the two groups.

Suggested Citation

  • Matthews, Kent & Meenagh, David & Minford, Patrick & Webb, Bruce, 2006. "Monetary Regimes: Is There a Trade-Off Between Consumption and Employment Variability?," CEPR Discussion Papers 5609, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5609
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    References listed on IDEAS

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    More about this item

    Keywords

    heterogenous welfare; interest rate setting; money supply rules; price level targeting; robustness;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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