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

A. Patrick Minford, Kent Matthews, Bruce Webb and David Meenagh

No 5609, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Robustness; Heterogenous welfare; Money supply rules; Interest rate setting; Price level targeting (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Date: 2006-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Working Paper: Monetary regimes: is there a trade-off between consumption and employment variability? (2006)
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