Dynamic Policy Interactions in a Monetary Union pp 143-148 | Cite as
Target System B
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Abstract
This chapter is based on target system B. The targets of the German government are zero unemployment and zero inflation in Germany. The model of unemployment and inflation can be characterized by a system of two equations:
An increase in German government purchases lowers unemployment in Germany. On the other hand, it raises inflation there.
$$u_1 = A_1 − G_1$$
(1)
$$\pi_1 = B_1 + G_1$$
(2)
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© Springer-Verlag Berlin Heidelberg 2011