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

Kent Gerard Matthews (), David Meenagh, A. Patrick L. Minford and Bruce David Webb ()

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