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Designing the optimal conservativeness of the central bank

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  • Montserrat Ferre

    ()
    (Department of Economics and CREIP, URV)

  • Carolina Manzano

    ()
    (Department of Economics and CREIP, URV)

Abstract

We propose an indicator of the degree of conservativeness of an independent central bank and we derive its optimal social value. We show that from a normative perspective, one can either design a central bank that cares about public spending or that it does not -but in the latter case the optimal weight on output stabilization would have to be higher and the central bank would be less conservative in the Rogoff sense.

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File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P140.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 2 ()
Pages: 1461-1473

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Handle: RePEc:ebl:ecbull:eb-12-00251

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Keywords: Central bank; conservativeness; independence.;

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References

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  1. Alesina, Alberto & Stella, Andrea, 2010. "The Politics of Monetary Policy," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 18, pages 1001-1054 Elsevier.
  2. Avinash Dixit & Luisa Lambertini, 2003. "Interactions of Commitment and Discretion in Monetary and Fiscal Policies," American Economic Review, American Economic Association, vol. 93(5), pages 1522-1542, December.
  3. Cukierman, Alex, 2007. "Central Bank Independence and Monetary Policymaking Institutions - Past Present and Future," CEPR Discussion Papers 6441, C.E.P.R. Discussion Papers.
  4. Beetsma, Roel M. W. J. & Bovenberg, A. Lans, 1997. "Central bank independence and public debt policy," Journal of Economic Dynamics and Control, Elsevier, vol. 21(4-5), pages 873-894, May.
  5. de Haan, Jakob, 1997. " The European Central Bank: Independence, Accountability and Strategy: A Review," Public Choice, Springer, vol. 93(3-4), pages 395-426, December.
  6. Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2000. "Central Bank Independence: An Update of Theory and Evidence," CEPR Discussion Papers 2353, C.E.P.R. Discussion Papers.
  7. Charles Wyplosz, 1997. "EMU: Why and How It Might Happen," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 3-21, Fall.
  8. Christopher Crowe & Ellen E. Meade, 2007. "The Evolution of Central Bank Governance around the World," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 69-90, Fall.
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Cited by:
  1. Ferré Carracedo, Montserrat & García Fortuny, Judit & Manzano, Carolina, 2013. "The Conservativeness of the Central Bank when Institutional Quality is Poor," Working Papers 2072/222198, Universitat Rovira i Virgili, Department of Economics.
  2. Ferré Carracedo, Montserrat & Manzano, Carolina, 2013. "Rational Partisan Theory with fiscal policy and an independent central bank," Working Papers 2072/211881, Universitat Rovira i Virgili, Department of Economics.
  3. Ferré Carracedo, Montserrat & Manzano, Carolina, 2013. "Independent Central Banks: Low inflation at no cost?: A model with fiscal policy," Working Papers 2072/222196, Universitat Rovira i Virgili, Department of Economics.

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