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What is Understanding Central Bank Independence about?

The document discusses central bank independence and monetary policy decision making. It summarizes that central banks aim to minimize unemployment and inflation deviations from their targets, facing a tradeoff between these goals. It finds that under discretion, central banks will have an incentive to surprise markets with higher inflation than expected to boost employment temporarily. Over time, this causes inflation expectations and actual inflation to rise. The equilibrium is one with unemployment at it

Author

Jared Murphy

Language

EN