A non-Normative Theory of Inflation and Central Bank Independence.

We study monetary policy under different central bank constitutions when the labor-market insiders set the nominal wage so that outsiders are involuntarily unemployed. If the insiders are in the majority, the representative insider will be the median voter. We show that an independent central bank, if controlled by the median voter, does not produce a systematic inflation bias, albeit equilibrium employment is too low from a social welfare point of view. A dependent central bank, in contrast, is forced by the government to collect seigniorage and to take the government's re-election prospects into account. The predictions of our theory are consistent with the evidence that central bank independence decreases average inflation and inflation variability, but does not affect employment variability.INFLATION ; MONETARY POLICY ; CENTRAL BANKS

Catching-up in the global factory: analysis and policy implications

MNEs shape the location of activities in the world economy, linking diverse regions in what has been called the global factory. This study portrays the evolution of incomes and employment in the global factory using a quantitative input–output approach. We find emerging economies forging ahead relative to advanced economies in income derived from fabrication activities, handling the physical transformation process of goods. In contrast, convergence in income derived from knowledge-intensive activities carried out in pre- and post-fabrication stages is much slower. We discuss possible barriers to catching-up and policy implications for emerging economies in developing innovation capabilities, stressing the pivotal role of MNEs