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Another Macro question!

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  • 08-05-2012 6:32pm
    #1
    Local_Chap
    Registered Users Posts: 568 ✭✭✭


    In my notes it says:

    Why should the ECB have such autonomy to achive its inflation target?
    • Independence from political pressure is seen as essential in achieving low inflation.
    • Two dimensions to this argument:
    • The record. The greater CB independence, the better the inflation record.
    • Politicians are (time) inconsistent in their commitment to curbing inflation. Sooner or later (but especially at election time), they will opt for lower unemployment (biased against inflation).

    Does this mean all three are the correct reasons or only the fisrt one and the second and third are reasons against it?


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    #2
    andrew
    Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 3,368 Mod ✭✭✭✭andrew


    Yeah, they're all reasons as to why an independant central bank is better at achieving lower inflation (though the second one is more of an empirical fact than anything else)


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    #3
    Local_Chap
    Registered Users Posts: 568 ✭✭✭Local_Chap


    andrew wrote: »
    Yeah, they're all reasons as to why an independant central bank is better at achieving lower inflation (though the second one is more of an empirical fact than anything else)

    Thanks! I hope your right,that question came up in the exam!


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