Optimal Central Banker Contracts and Common Agency
Abstract
This paper considers the contracting approach to centralbanking in a simple common agency model. We suggest thatcentral banker contracts that do not consider the possibilityof more than one principal existing are incomplete contracts.Such incomplete contracts can be a poor form ofmonetary policy delegation under common agency. We develop amodel with two principals – society (government) and ageneric interest group, whose objective conflicts withsociety’s ex ante preferences by incorporating an inflationarybias. We determine when the government-offered orinterest-group-offered contract dominates the central banker’sdecision. The results largely depend on whether theinterest-group-offered contract is written in terms of outputor inflation. Copyright Kluwer Academic Publishers 2004Download Info
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Bibliographic Info
Article provided by Springer in its journal Public Choice.
Volume (Year): 121 (2004)
Issue (Month): 1 (October)
Pages: 131-155
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Web page: http://www.springerlink.com/link.asp?id=100332
Related research
Keywords:Other versions of this item:
- Georgios E. Chortareas & Stephen M. Miller, 2000. "Optimal Central Banker Contracts and Common Agency," Working papers 2000-03, University of Connecticut, Department of Economics, revised Jun 2002.
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Ibrahim L. Awad, 2008.
"Towards measurement of political pressure on central banks in the emerging market economies: the case of the central bank of Egypt,"
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Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 1, pages 63-89, December.
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