State-contingent Inflation Contracts and Output Persistence

Ben Lockwood

No 1348, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper shows that the government can achieve its precommitment outcome in monetary policy when output follows an autoregressive process, by offering the central banker a linear inflation contract, and where the parameters of the contract depend on lagged output. This note therefore offers an extension of the recent results of Walsh to the case of persistence in real economic variables such as output or unemployment

Keywords: Inflation Contracts; Monetary Policy; Output Persistence (search for similar items in EconPapers)
JEL-codes: E52 (search for similar items in EconPapers)
Date: 1996-03
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Working Paper: State-Contingent Inflation Contracts and Output Persistence (1995)
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