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Central banks as agents of employment creation


  • Gerald Epstein


Employment creation has dropped off the direct agenda of most central banks. The so-called “global best practice” approach to central banking has not focused on economic growth or employment generation but rather on keeping inflation in the low single digits. However, the policy record shows that employment generation and economic growth are often not by-products of inflation focused central bank policy. This chapter argues that there should be a return to the historical norm of central bank policy in which employment creation and more rapid economic growth join inflation and stabilization more generally as key goals of central bank policy. Supporting this argument, the chapter summarizes major lessons of a multi-country research project undertaken by an international team of economists which show that, within the constraints of contemporary economic conditions, there are viable alternatives to inflation targeting that can focus more on important social, real sector outcomes such as employment generation and poverty reduction.

Suggested Citation

  • Gerald Epstein, 2007. "Central banks as agents of employment creation," Working Papers 38, United Nations, Department of Economics and Social Affairs.
  • Handle: RePEc:une:wpaper:38

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    References listed on IDEAS

    1. Arjun Jayadev, 2008. "The class content of preferences towards anti-inflation and anti-unemployment policies," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 161-172.
    2. Frenkel, Roberto & Ros, Jaime, 2006. "Unemployment and the real exchange rate in Latin America," World Development, Elsevier, vol. 34(4), pages 631-646, April.
    3. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 115-136, Fall.
    4. Ocampo, José Antonio, 2003. "Capital-account and counter-cyclical prudential regulations in developing countries," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1796, September.
    5. Robert E. Hall, 2005. "Separating the business cycle from other economic fluctuations," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 133-179.
    6. Brimmer, Andrew F, 1971. "Central Banking and Economic Development: The Record of Innovation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(4), pages 780-792, November.
    7. Jayadev, Arjun, 2006. "Differing preferences between anti-inflation and anti-unemployment policy among the rich and the poor," Economics Letters, Elsevier, vol. 91(1), pages 67-71, April.
    8. Chorng-Huey Wong & Eric V. Clifton & Gene L. Leon, 2001. "Inflation Targeting and the Unemployment-Inflation Trade-off," IMF Working Papers 01/166, International Monetary Fund.
    9. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One Decade of Inflation Targeting in the World: What Do We Know and What Do We Need to Know?," NBER Working Papers 8397, National Bureau of Economic Research, Inc.
    10. James Tobin, 1980. "Stabilization Policy Ten Years After," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(1, Tenth ), pages 19-90.
    11. Eichengreen, B. & Masson, P. & Savastano, M. & Sharma, S., 1999. "Transition Strategies and Nominal Anchors on the Road to Greater Exchange-Rate Flexibility," Princeton Essays in International Economics 213, International Economics Section, Departement of Economics Princeton University,.
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    Cited by:

    1. James Heintz & Léonce Ndikumana, 2010. "Is There a Case for Formal Inflation Targeting in Sub-Saharan Africa?," Working Papers wp218, Political Economy Research Institute, University of Massachusetts at Amherst.
    2. Gerald Epstein, 2009. "Rethinking Monetary and Financial Policy: Practical suggestions for monitoring financial stability while generating employment and poverty reduction," Published Studies ilo_epstein11_09, Political Economy Research Institute, University of Massachusetts at Amherst.
    3. Muqtada, Muhammed., 2015. "Challenges of price stability, growth and employment in Bangladesh : role of the Bangladesh Bank," ILO Working Papers 994873053402676, International Labour Organization.
    4. repec:ilo:ilowps:487305 is not listed on IDEAS

    More about this item


    inflation targeting; employment; central bank; poverty reduction.;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N2 - Economic History - - Financial Markets and Institutions
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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