Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82948
Authors: 
Jordahl, Henrik
Laséen, Stefan
Year of Publication: 
1999
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 1999:23
Abstract: 
How does central bank conservatism affect labor market reform? In this paper we examine the economic forces at work. An increase in conservatism triggers two opposite effects. It reduces the inflation bias of discretionary monetary policy and hence the benefits of a reform. It also increases unemployment variability, which increases the precautionary benefits of a reform. In combination, the two effects produce a u-shaped relation between conservatism and labor market reform. An empirical investigation provides evidence consistent with this prediction.
Subjects: 
Central bank independence
labor market reform
credibility
flexibility
inflation
unemployment
rigidities
JEL: 
E58
E63
J38
Document Type: 
Working Paper

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