Thursday, October 21, 2010

Full employment...

...and price stability.

The dual mandate of the Fed has been oft-criticized for its "having its cake and eating it too" panglossian view.

The largest problem in my view is the time lags between the two mandates. Price stability is largely a mechanical problem that involves policy instruments entirely different from the more politically charged issue of full employment.

We are observing in real time the ramifications of these parallel lines.

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