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The Role of Policymakers in Business Cycle Fluctuations

The Role of Policymakers in Business Cycle Fluctuations by Jim Granato
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This book's central theme is that a policymaker's role is to enhance the public's ability to coordinate their price information, price expectations, and economic activities. This role is fulfilled when policymakers maintain inflation stability. Inflation persists less when an implicit or explicit inflation target is met. Granato and Wong argue that inflation persistence is reduced when the public substitutes the prespecified inflation target for past inflation. A by-product of this co-ordination process is greater economic stability. In particular, inflation stability contributes to greater economic output stability, including the potential for the simultaneous reduction of both inflation and output variability - inflation-output co-stabilization (IOCS). Granato and Wong use historical, formal, and applied statistical analysis of business-cycle performance in the United States for the 1960 to 2000 period. They find that during periods when policymakers emphasize inflation stability, inflation uncertainty and persistence were reduced.
Cambridge University Press; March 2006
318 pages; ISBN 9780511166822
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Title: The Role of Policymakers in Business Cycle Fluctuations
Author: Jim Granato; M. C. Sunny Wong
 
ISBNs
0511166826
9780511166822
9780521860161