Growth and inflation targeting by the government and the central bank: Alignment or conflict?

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Dynamic optimization finds trade-offs in inflation and growth targets, suggesting potential conflicts in policy application.

Dual targets of growth and inflation may conflict, influencing government and central bank policies.
Empirical and simulated results illustrate target fluctuations arise from staggered decision-making dynamics.
A stochastic dynamic optimization model assesses strategic interactions amid uncertainties in target settings.
Achieving balance in growth and inflation requires careful consideration of their inherent trade-offs.

Basak et al. (2025) studied this question.

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