Assessing the Impacts and Policy Alternatives
Edited by Gerald A. Epstein and A. Erinc Yeldan
Chapter 5: The Gendered Political Economy of Inflation Targeting: Assessing its Impacts on Employment
1 Elissa Braunstein and James Heintz INTRODUCTION 5.1 Central banks in developing countries are increasingly maintaining low inflation rates as the central goal of monetary policy, without much consideration of how these policies impact real outcomes like employment, investment and growth (Epstein, 2003). Although targeting very low inflation rates seems to have done little to raise economic growth, these policies remain a key feature of neoliberal approaches to monetary policy (Epstein, 2000). Gerald Epstein and Juliet Schor argue that anti-inflation policy and neoliberal approaches to central banking emerged from the ‘contested terrain’ of central banks – the class and intra-class conflicts over the distribution of income and power in the macroeconomy (Epstein, 2000; Epstein and Schor, 1990). Their work underscores the importance of understanding monetary policy from a political economy perspective, as the distribution of the gains and costs of economic policy proffers insight into both a policy’s genesis and its longer term consequences. In this chapter we build on their analysis by considering the employment costs of inflation reduction in developing countries from a gender perspective. We explore two empirical questions: (1) what is the impact, if any, of inflation reduction on employment, and is the impact different for women and men, and (2) how are monetary policy indicators connected to deflationary episodes and gender-specific employment effects? We find a common pattern among countries undergoing what we term contractionary inflation reduction, or periods of declining inflation that are accompanied by a loss of employment. After controlling for long-term employment trends,...
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