Dual Mandate
Dual mandate is a term used to describe a situation in which two different objectives must be met. It is often used in the context of central banking, where a central bank is tasked with both maintaining price stability and promoting economic growth. This means that the central bank must balance the two objectives, as they can often be in conflict with each other. For example, if the central bank wants to promote economic growth, it may need to lower interest rates, which could lead to inflation. On the other hand, if the central bank wants to maintain price stability, it may need to raise interest rates, which could lead to slower economic growth.
History of the Term
The term “dual mandate” was first used in the United States in 1977, when the Federal Reserve Act was amended to include the dual mandate of “promoting effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” This amendment was a response to the economic turmoil of the 1970s, when inflation was high and unemployment was rising. The dual mandate was seen as a way to balance the two objectives of price stability and economic growth.
Comparison Table
| Objective | Interest Rates | Economic Growth |
|---|---|---|
| Price Stability | Higher | Slower |
| Economic Growth | Lower | Faster |
Summary
Dual mandate is a term used to describe a situation in which two different objectives must be met. It is often used in the context of central banking, where a central bank is tasked with both maintaining price stability and promoting economic growth. This means that the central bank must balance the two objectives, as they can often be in conflict with each other. For more information on the dual mandate, you can visit the websites of the Federal Reserve, the European Central Bank, and the Bank of England.
See Also
- Monetary Policy
- Interest Rates
- Inflation
- Unemployment
- Fiscal Policy
- Central Bank
- Economic Growth
- Price Stability
- Monetary Policy Tools
- Monetary Policy Framework
