Norges Bank governor explores monetary policy trade-offs
Demand channel requires greater unemployment than currency channel, Bache argues
The different transmission channels of monetary policy come with trade-offs, the governor of Norges Bank told an event on October 24 held by the Peterson Institute.
Ida Wolden Bache pointed to two main channels: one relating to aggregate demand and the other to the exchange rate.
Under the first channel, aggregate demand is dampened by increased interest rate expenses. When this channel is strong, Bache said, lowering inflation comes with a significant increase in unemployment.
However, when the
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