Monetary Policy and Unemployment: The US, Euro-area and Japan (Routledge International Studies in Money and Banking)

288 Pages·2005·3.93 MB·English

by  Willi Semmler

Monetary Policy and Unemployment
This book pulls together papers presented at a conference in honor of the 1981 Nobel
Prize Winner for Economic Science, the late James Tobin. Among the contributors are
Masanao Aoki (UCLA), Olivier Blanchard (MIT), Edmund Phelps (Columbia
University), Charles Goodhart (LSE), Marco Buti (European Commission), Hiroshi
Yoshikawa (Tokyo University and BoJ), Athanasios Orphanides (Fed, US), and Jerome
Henry (ECB).
Written in the spirit of the long time Yale Professor, James Tobin, who has held the
view that monetary policy is not neutral, this volume provides an analysis of the different
economic performances exhibited by the USA, the Euro-area, and Japan in the last
decade. Through addressing the potential role monetary policy has on economic growth
and unemployment, this book also discusses the new policy rules that, perhaps, should
have been and should be used in the future to improve the economic performance of the
three regions.
This book will be of great interest to both undergraduate and graduate economic
students, academics, and practitioners.
Willi Semmler is Professor of Economics at the New School University New York,
and the Center for Empirical Macroeconomics at Bielefeld University.
Routledge international studies in money
and banking
1 Private Banking in Europe
Lynn Bicker
2 Bank Deregulation and Monetary Order
George Selgin
3 Money in Islam
A study in Islamic political economy
Masudul Alam Choudhury
4 The Future of European Financial Centres
Kirsten Bindemann
5 Payment Systems in Global Perspective
Maxwell J.Fry, Isaak Kilato, Sandra Roger, Krzysztof Senderowicz, David Sheppard,
Francisco Solis, and John Trundle
6 What is Money?
John Smithin
7 Finance
A characteristics approach
Edited by David Blake
8 Organisational Change and Retail Finance
An ethnographic perspective
Richard Harper, Dave Randall, and Mark Rouncefield
9 The History of the Bundesbank
Lessons for the European Central Bank
Jakob de Haan
10 The Euro
A challenge and opportunity for financial markets Published on behalf of Société
Universitaire Européenne de Recherches Financières (SUERF)
Edited by Michael Artis, Axel Weber, and Elizabeth Hennessy
11 Central Banking in Eastern Europe
Nigel Healey
12 Money, Credit and Prices Stability
Paul Dalziel
13 Monetary Policy, Capital Flows and Exchange Rates
Essays in memory of Maxwell Fry
Edited by William Allen and David Dickinson
14 Adapting to Financial Globalisation
Published on behalf of Société Universitaire Européenne de Recherches Financières
(SUERF)
Edited by Morten Balling, Eduard H.Hochreiter, and Elizabeth Hennessy
15 Monetary Macroeconomics
A new approach
Alvaro Cencini
16 Monetary Stability in Europe
Stefan Collignon
17 Technology and Finance
Challenges for financial markets, business strategies and policy makers
Published on behalf of Société Universitaire Européenne de Recherches Financières
(SUERF)
Edited by Morten Balling, Frank Lierman, and Andrew Mullineux
18 Monetary Unions
Theory history public choice
Edited by Fonest H.Capie and Geoffrey E.Wood
19 HRM and Occupational Health and Safety
Carol Boyd
20 Central Banking Systems Compared
The ECB, the pre-Euro Bundesbank and the Federal Reserve System
Emmanuel Apel
21 A History of Monetary Unions
John Chown
22 Dollarization
Lessons from Europe and the Americas
Edited by Louis-Philippe Rochon and Mario Seccareccia
23 Islamic Economics and Finance: A Glossary, 2nd Edition
Muhammad Akram Khan
24 Financial Market Risk
Measurement and analysis
Cornelis A.Los
25 Financial Geography
A Banker’s view
Risto Laulajainen
26 Money Doctors
The experience of international financial advising 1850–2000
Edited by Marc Flandreau
27 Exchange Rate Dynamics
A new open economy macroeconomics perspective
Edited by Jean-Oliver Hairault and Thepthida Sopraseuth
28 Fixing Financial Crises in the 21st Century
Edited by Andrew G.Haldane
29 Central Banking in Eastern Europe
Edited by Nigel Healey and Barry Harrison
30 Exchange Rates, Capital Flows and Policy
Edited by Peter Sinclair, Rebecca Driver, and Christoph Thoenissen
31 Monetary Policy and Unemployment
The US, Euro-area, and Japan
Edited by Willi Semmler
Monetary Policy and
Unemployment
The US, Euro-area, and Japan
Edited by
Willi Semmler

LONDON AND NEW YORK
This project was generously supported by the Bernard Schwartz Center for
Economic Policy Analysis at New School University
First published 2005 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York,
NY 10016
Routledge is an imprint of the Taylor & Francis Group
This edition published in the Taylor & Francis e-Library, 2005.
“To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of
thousands of eBooks please go to http://www.ebookstore.tandf.co.uk/.”
© 2005 Willi Semmler for selection and editorial matters; individual chapters, the
contributors
All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or
by any electronic, mechanical, or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or retrieval system, without permission
in writing from the publishers.
British Library Cataloguing in Publication Data A catalogue record for this book is available from
the British Library
Library of Congress Cataloging in Publication Data
Monetary policy and unemployment: the US, Euro-area, and Japan/ edited by Willi Semmler. p.
cm. Papers presented at a conference hosted by the Economics Dept. and the Center for Economic
Policy Analysis of the New School University held from Nov. 22–23, 2002. Includes
bibliographical references and index. 1. Monetary policy—United States—Congresses. 2.
Monetary policy—European Union countries—Congresses. 3. Monetary policy—Japan—
Congresses. 4. Unemployment—United States— Congresses. 5. Unemployment—European Union
countries—Congresses. 6. Unemployment—Japan—Congresses. I. Semmler, Willi. II. New
School Universiy Economics Dept. III. New School University. Center for Economic Policy
Analysis.
HG540.M659 2005 331.13′7–dc22 2004013132
ISBN 0-203-32958-9 Master e-book ISBN
ISBN 0-415-70087-6 (Print Edition)
Contents

List of contributors ix

1 Introduction 1

WILLI SEMMLER

6
PART I Overview: unemployment and monetary policy in the three currency
areas

2 Monetary policy and unemployment 8

OLIVIER BLANCHARD
3 Some notes on monetary policy and unemployment 14

EDMUND PHELPS
4 The long stagnation of the Japanese economy during the 1990s and 18
macroeconomic policies
HIROSHI YOSHIKAWA

21
PART II Labor market institutions and unemployment

5 The role of shocks and institutions in the rise of European 23
unemployment: the aggregate evidence
OLIVIER BLANGHARD AND JUSTIN WOLFERS
6 Labor market institutions and unemployment in Europe: a comment on 56
Blanchard and Wolfers
DAVID R.HOWELL
7 Labor market dynamics in the Euro-area: a model-based sensitivity 63
analysis
ALISTAIR DIEPPE, JÉRÔME HENRY, AND PETER McADAM

101
PART III Structuralist causes of unemployment and monetary policy

8 The structuralist perspective on real exchange rate, share price level, 103
and employment path: what room is left for money?

HIAN TECK HOON, EDMUND PHELPS, AND GYLFI ZOEGA
9 The long stagnation and monetary policy in Japan: a theoretical 130
explanation

MASANAO AOKI, HIROSHI YOSHIKAWA, AND TOSHIHIRO
SHIMIZU
10 Monetary policy, the labor market, and pegged exchange rates: a study 164
of the German economy
PETER FLASCHEL, GANG GONG, AND WILLI SEMMLER

204
PART IV Monetary policy rules, fiscal policy, and unemployment

11 The constitutional position of the Central Bank 206

CHARLES GOODHART
12 Activist stabilization policy and inflation: the Taylor rule in the 1970s 216

ATHANASIOS ORPHANIDES
13 The Fed’s monetary policy rule: past, present, and future 237

ANTONIO MORENO
14 What is the impact of tax and welfare reforms on fiscal stabilizers? A 253
simple model and an application to EMU
MARCO BUTI AND PAUL VAN DEN NOORD

Index 273
Contributors
Masanao Aoki is Emeritus Professor of Economics with the Department of Economics,
University of California, Los Angeles and also visiting researcher of the Center for
International Research on Japanese Economy University of Tokyo.
Olivier Blanchard belongs to the Class of 1941 and is Professor of Economics, at the
Massachusettes Institute of Technology Cambridge, MA.
Marco Buti is Director of the Economies of the Member States at the European
Commission, and Lecturer on Monetary and Fiscal Policies in EMU at the Université
Libre de Bruxelles.
Alistair Dieppe is an Economist in DG Research at the European Central Bank.
Peter Flaschel is Professor of Economics at the University of Bielefeld. He is currently
working in the area of Macrodynamics, in particular, on real-financial market
interactions with Carl Chiarella, Willi Semmler and Reiner Franke as co-authors.
Gang Gong is Associate Professor at the School of Economics and Management in
Tsinghua University Beijing
Charles Goodhart is the Deputy Director of the Financial Markets Group and Emeritus
Professor of Economics at the London School of Economics.
Jérôme Henry is an Advisor in charge of Forecast Goordination in DG Economics at the
European Central Bank.
Hian Teck Hoon is Associate Professor at Singapore Management University
David R.Howell is Professor of Economics and the Academic Dean at the Milano
Graduate School, New School University New York. He is also a Research Associate
at the New School’s Bernhard Schwartz Center for Economic Policy Analysis
(CEPA).
Peter McAdam is Senior Economist in DG Research at the European Central Bank.
Antonio Moreno is Assistant Professor at the Economics Department in the Universidad
de Navarra, Spain.
Paul Van den Noord is Senior Economist in the Economics Department of the OECD
where he is currently heading the European Union Desk.
Athanasios Orphanides is an Advisor in the Division of Monetary Affairs at the Board
of Governors of the Federal Reserve System, a Research Fellow of the Centre for
Economic Policy Research, and a Fellow of the Center for Financial Studies.
Edmund Phelps is McVickar Professor of Political Economy at Columbia University,
New York City, and Director of the Center on Capitalism and Society in Columbia’s
Earth Institute.
Willi Semmler is Professor of Economics at the New School University New York, and
a Research Fellow at the Bernard Schwartz Center for Economic Policy Analysis,
New School University and at the Center for Empirical Macroeconomics at Bielefeld
University