2008 | OriginalPaper | Chapter
Central Bank and Governments Differ in Loss Function
Published in: Inflation and Unemployment in a Monetary Union
Publisher: Springer Berlin Heidelberg
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1) The static model. An increase in European money supply lowers unemployment in Germany and France. On the other hand, it raises inflation there. An increase in German government purchases lowers unemployment in Germany. On the other hand, it raises inflation there. Correspondingly, an increase in French government purchases lowers unemployment in France. On the other hand, it raises inflation there.