Finally, I would also like to take this opportunity to reiterate the need for progress on structural reform. Fiscal consolidation plans should be part of a structural reform agenda that favours growth, competitiveness and employment.
A particularly nasty case arises when B and C are both large. In this case, slack has a large effect on inflation, and that effect tends to be very persistent. One implication of a large C is that, if a boom drives inflation up, it will tend to stay up unless offset by a subsequent bust.