Given the Federal Reserve’s dual mandate to promote price stability and maximum employment, an obvious question is “Why does the Federal Reserve appear to be doing so much better on one mandate than the other?” In this speech, I present a simple model that suggests an answer to this question.
Everywhere governments have undertaken significant and difficult reforms and continue to do so. Although more work is certainly needed, we should appreciate how quickly things improve when serious action is taken. To foster employment and growth policy makers have to address macroeconomic imbalances in the euro area.