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

42 Pages Posted: 29 Jun 2006

See all articles by Patrick Minford

Patrick Minford

Cardiff University Business School; Centre for Economic Policy Research (CEPR)

Kent Matthews

Cardiff University Business School

David Meenagh

Cardiff University Business School

Bruce Webb

Cardiff University Business School

Date Written: April 2006

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

JEL Classification: E52

Suggested Citation

Minford, Patrick and Matthews, Kent and Meenagh, David and Webb, Bruce, Monetary Regimes: Is There a Trade-Off between Consumption and Employment Variability? (April 2006). CEPR Discussion Paper No. 5609, Available at SSRN: https://ssrn.com/abstract=913083

Patrick Minford (Contact Author)

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5728 (Phone)
+44 29 2087 4419 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Kent Matthews

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5855 (Phone)
+44 29 2087 4419 (Fax)

David Meenagh

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5198 (Phone)
+44 29 2087 4419 (Fax)

Bruce Webb

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 2920 876802 (Phone)

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