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Presented to the Faculty of Economics and Social Sciences of the University of Fribourg (Switzerland) in fulfillment of the requirements for the degree of Doctor of Economics and Social Sciences

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When there are frictions in setting nominal wages, however, ariseintherealwagerequiresthatinflationbeallowedtodriftdown.Theinflationtargeting central bank, seeing this drift down in inflation, cuts the interest rate tokeep inflation on target. In our model, this cut in the interest rate triggers a creditboom and makes the economic expansion much bigger than is socially optimal. In asituation like this, a central bank that ‘leans against the wind’ when credit expandssharply would raise welfare by reducing the magnitude of the boom-bust cycle....
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Presented to the Faculty of Economics and Social Sciences of the University of Fribourg (Switzerland) in fulfillment of the requirements for the degree of Doctor of Economics and Social Sciences

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