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Under a strict inflation targeting framework, if a country experiences a sudden rise in unemployment while inflation remains at the target level, the central bank is mandated to prioritize lowering unemployment over maintaining the inflation target.
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Introduction to Macroeconomics Course
Ch.5 Macroeconomic policy: Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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The 1990s Shift Towards Central Bank Independence
A country's central bank is given the authority to adjust interest rates to manage the economy. Its official mandate is to pursue two co-equal goals: maintaining low unemployment and achieving stable prices. The government, however, has not defined a specific numerical value for what constitutes 'stable prices'. Based on this description, which essential component of a pure inflation targeting framework is missing?
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