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Central banks as agents of employment creation

  • Gerald Epstein
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    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.

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    File URL: http://www.un.org/esa/desa/papers/2007/wp38_2007.pdf
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    Paper provided by United Nations, Department of Economics and Social Affairs in its series Working Papers with number 38.

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    Length: 20 pages
    Date of creation: Jul 2007
    Date of revision:
    Handle: RePEc:une:wpaper:38
    Contact details of provider: Web page: http://www.un.org/en/development/desa/working-papers.html
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    1. Laurence Ball & N. Gregory Mankiw, 2002. "The NAIRU in Theory and Practice," Harvard Institute of Economic Research Working Papers 1963, Harvard - Institute of Economic Research.
    2. 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.
    3. Frenkel, Roberto & Ros, Jaime, 2006. "Unemployment and the real exchange rate in Latin America," World Development, Elsevier, vol. 34(4), pages 631-646, April.
    4. Arjun Jayadev, . "The Class Content of Preferences Towards Anti-Inflation and Anti Unemployment Policies," Working Papers 8, University of Massachusetts Boston, Economics Department.
    5. 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.
    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 780-92, November.
    7. 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,.
    8. 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.
    9. Ocampo, Jose Antonio, 2002. "Capital-Account and Counter-Cyclical Prudential Regulations in Developing Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    10. Chorng-Huey Wong & Eric V. Clifton & H. L. Leon, 2001. "Inflation Targeting and the Unemployment-Inflation Trade-Off," IMF Working Papers 01/166, International Monetary Fund.
    11. 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.
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