Bulletin n. 1/2005
December 2005
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
  • Rĝisland Ĝistein
    Should Central Banks care about regional imbalances?
    in Scottish Journal of Political Economy , May 2005 - Vol. 52 Issue 2 ,  2005 ,  Page 242
    Regional imbalances may arise both as a result of asymmetric shocks and of divergent responses to symmetric shocks, such as monetary policy shocks. This paper analyses flexible inflation targeting when regional imbalances are included in the loss function. By adding regional imbalances, the time-inconsistency problem in monetary policy becomes more complex. The paper analyses alternative institutional arrangements designed to improve the discretionary equilibrium. Even in the absence of an over-ambitious output target, it is shown that the outcome of monetary policy is improved if the central bank places less weight on regional imbalances than the political authorities.
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