Chapter 15 - Assignment 2: A Case for Independence
Chapter 15 - Assignment 2: A Case for Independence
Read Stanley Fischer's article: "Central Banking: The Challenges Ahead."
- According to Fischer, why might there be a short-run inflationary bias under a politically
controlled macroeconomic policy? Is this argument similar to the "political business cycle" argument?
- What does the empirical evidence suggest about the relationship between
central bank independence and inflation rates?
- Use AD and AS curves to illustrate Fischer's argument that there is no conflict between the
goals of maintaining full-employment and price stability when demand shocks occur.
- Use AD and AS curves to illustrate the conflict between full-employment and price stability
goals when supply shocks occur.
- Why does Fischer advocate the use of an inflation target for a central bank?
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