Discussion Paper Details

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Title: State-contingent Inflation Contracts and Output Persistence

Author(s): Ben Lockwood

Publication Date: March 1996

Keyword(s): Inflation Contracts, Monetary Policy and Output Persistence

Programme Area(s): International Macroeconomics

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

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Bibliographic Reference

Lockwood, B. 1996. 'State-contingent Inflation Contracts and Output Persistence'. London, Centre for Economic Policy Research.