Starting from a Post-Keynesian model in which employment is determined by effective demand and the NAIRU is viewed as a limit to employment, enforced by monetary policy reacting upon conflict inflation, the effects of central bank independence and labour market institutions on macroeconomic performance are considered and the perspectives for employment and inflation in the European Monetary Uni...

Rogoff, 1985, suggested that central bank independence would lead to lower inflation but greater output variability. Alesina and Gatti, 1995, demonstrated Rogoff’s work was partial by only considering economic sources of output variability. By including political factors, circumstances could be identified when making a central bank independent could reduce both inflation and output variability....

We investigate the influence o f institutional arrangements on inflation in 18 OECD countries. The factors considered are, on the on hand institutional constraints on monetary policy such as the independence o f the Central Bank and commitment to fixed exchange rates and on the other political factors such as ideological and re-election motives. We find that an independent Central Bank has a di...