An Equilibrium Analysis of Central Bank Independence and Inflation

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An Equilibrium Analysis of Central Bank Independence and Inflation

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Gregory W. Huffman

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Gregory W. Huffman

Abstract

A dynamic equilibrium model is constructed to analyze the implications of different degrees of central bank independence. In the main model, agents are permitted to vote on the desired inflation and labor taxes to finance government spending. Multiple perfect-foresight equilibria arise, and one of them exhibits fluctuations in output, investment, and the inflation rates as a result of permitting agents to vote. If, instead of having agents vote each period on these parameters, inflation and labor taxes in the model are set at fixed levels, these fluctuations do not arise, and a lower inflation rate can appear.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 30 (1997)
Issue (Month): 4 (November)
Pages: 943-58
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Handle: RePEc:cje:issued:v:30:y:1997:i:4:p:943-58

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Paper
- Gregory W. Huffman, 1995. "An equilibrium analysis of central bank independence and inflation," Working Papers 95-01, Federal Reserve Bank of Dallas. [Downloadable!]

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Michele Boldrin, 1993. "Public Education and Capital Accumulation," Working Papers 9301, Centro de Investigacion Economica, ITAM.
Other versions:
- Michele Boldrin, 1992. "Public Education and Capital Accumulation," Discussion Papers 1017, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
- Michele Boldrin, 2005. "Public Education and Capital Accumulation," Levine's Bibliography 172782000000000090, UCLA Department of Economics. [Downloadable!]
- Boldrin, Michele, 2005. "Public education and capital accumulation," Research in Economics, Elsevier, vol. 59(2), pages 85-109, June. [Downloadable!] (restricted)
Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October. [Downloadable!] (restricted)
Alesina, Alberto & Spear, Stephen E., 1988. "An overlapping generations model of electoral competition," Journal of Public Economics, Elsevier, vol. 37(3), pages 359-379, December. [Downloadable!] (restricted)
Other versions:
- Alberto Alesina & Stephen E. Spear, 1987. "An Overlapping Generations Model of Electoral Competition," NBER Working Papers 2354, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Gregory W. Huffman, 1993. "On the fluctuations induced by majority voting," Research Paper 9342, Federal Reserve Bank of Dallas. [Downloadable!]
Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, Oxford University Press, vol. 6(3), pages 353-98, September.
Tabellini, Guido, 1991. "The Politics of Intergenerational Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 335-57, April. [Downloadable!] (restricted)
Other versions:
- Guido Tabellini, 1989. "The Politics of Intergenerational Redistribution," NBER Working Papers 3058, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc. [Downloadable!]

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Prakash Loungani & Nathan Sheets, 1995. "Central bank independence, inflation and growth in transition economies," International Finance Discussion Papers 519, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Other versions:
- Loungani, Prakash & Sheets, Nathan, 1997. "Central Bank Independence, Inflation, and Growth in Transition Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 381-99, August.

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This page was last updated on 2009-11-25.

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