This paper evaluates the Reserve Bank of New Zealand Act of 1989 from a principal-agent perspective, arguing that the act represents a dismissal rule. The optimal dismissal rule requires that the central banker be dismissed whenever inflation exceeds a critical level that depends on aggregate supply disturbances and measurement error in the inflation index. This is essentially the structure established by the act. The scope for renegotiating the target rate, however, creates an incentive for the government to set the critical rate too high. Consequently, the inflation bias of discretion is reduced but not completely eliminated. Copyright 1995 by Ohio State University Press.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.)