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The problem of monetary policy delegation is formulated as a two-stage non-cooperative game between the government and the central bank.
This paper analyzes the effectiveness of delegation in solving the time inconsistency problem of monetary policy using a microfounded general equilibrium model where delegation and reappointment are explicitly included into the government's strategy.
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The deep problems of monetary union are encapsulated in this tension.
The snag is that the familiar problems of monetary inflation apply to job-title inflation as well.
Even so, Germany's economic clout means Angela Merkel has an effective veto on the proposals canvassed for sorting out the problems of monetary union.
The major problem of modern monetary policy centres on how a central bank should use this power.
The dispute is an illustration of the problem afflicting discussions of monetary policy.
But America has important features that temper the problems of unified monetary policy.
From the latest IMF World Economic Outlook: Some of this reflected the problems of the monetary union — but there has been a lot of austerity even in core nations.
I've been hearing various attempts to explain the ECB's utterly bizarre refusal to cut interest rates despite soaring unemployment, sliding inflation, and on top of all that the special problems of a monetary union that probably can't survive unless overall demand is strong.
And within our political system we do not find leaders who are willing and able to clearly identify the problems of our monetary system, nor offer coherent solutions.
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