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.
*  *  *  Ladies and Gentlemen: On behalf of the Central Bank of Bahrain, it gives me great pleasure to welcome you to this Workshop on the “Relationship between financial institutions and export credit and investment insurance agencies”.