Commitment Rather Than Independence: An Institutional Design for Reducing the Inflationary Bias of Monetary Policy
AbstractThis paper distinguishes between central bank independence and central bank commitment. Independent central banks are free to choose their policy goals and instruments, whereas committed central banks are limited in their behavior with the goal of price stability. It is argued that for political and economic reasons commitment is to be preferred over independence. For sixteen industrial countries, the central banks are ranked according to their degree of central bank independence and to their degree of commitment. The empirical evidence does not indicate a significant relationship between independence, whereas a commitment strategy, which does not require institutional changes, lowers inflation without affecting output. Copyright 1996 by WWZ and Helbing & Lichtenhahn Verlag AG
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Kyklos.
Volume (Year): 49 (1996)
Issue (Month): 3 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0023-5962
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- Forder, J., 2000.
"Traps in the Measurement of Independence and Accountability of Central Banks,"
Economics Series Working Papers
9923, University of Oxford, Department of Economics.
- James Forder, 2000. "Traps in the Measurement of Independence and Accountability of Central Banks," Economics Series Working Papers 23, University of Oxford, Department of Economics.
- James Forder, 2002. "Interests and 'Independence': The European Central Bank and the theory of bureaucracy," International Review of Applied Economics, Taylor and Francis Journals, vol. 16(1), pages 51-69.
- Cem Mehmet Baydur & Bora Suslu & Selahattin Bekmez, 2004. "The independence of central bank in view of Rogoff: The Turkish experience," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 143-.
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