Assume you are a monetary authority in charge of the monetary policy at your country's central bank. You look at data on inflation and output for the past 10 years and observe a positive relationship between the two variables. You decide to exploit this relationship. Based on the following topics, what monetary policy would you recommend? What would be the outcome of this policy?

topics:

Empirical evidence of the relationship between unemployment and inflation

The Lucas Model

Nonrandom Inflation

Random Monetary Policy

The Lucas Critique

Optimal Monetary Policy

philis curve