Employment targeting

Jean-Pascal Bénassy (1, 2)

1 PJSE - Paris-Jourdan Sciences Economiques
2 CEPREMAP - Centre pour la recherche économique et ses applications

Inflation is often given the central role in discussions of monetary policy. Is this emphasis warranted? We investigate this in a DSGE model and find: (1) One can implement the optimal interest rate policy using only employment as an instrument, (2) using inflation as an instrument would lead to lower utility.

Keywords: Employment targeting; Inflation; Interest rate rules; Taylor rules

Domains: Humanities and Social Sciences; Economics and Finance

Jean-Pascal Bénassy. Employment targeting. Economics Letters, 2008, 99 (2), pp.320-323. ⟨10.1016/j.econlet.2007.07.020⟩. ⟨halshs-00754286⟩