Inflation Targets and Contracts with Uncertain Central Banker Preferences
AbstractWithin a standard model of monetary delegation the authors show that the optimal linear inflation contract performs strictly better than the optimal inflation target when there is uncertainty about the central banker's preferences. The optimal combination of a contract and a target performs best and eliminates the inflation bias and any variability not associated with supply shocks. However, variability due to shocks is enhanced by uncertain central banker preferences. Quadratic contracts are shown to overcome this problem partly, but the advantages of delegation may still be dominated by the 'excess variability' due to shocks. Hence, the credibility-stabilization tradeoff is restored.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 30 (1998)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Beetsma, R.M.W.J. & Jensen, H., 1996. "Inflation targets and contracts with uncertain central banker preferences," Discussion Paper 1996-93, Tilburg University, Center for Economic Research.
- Beetsma, Roel & Jensen, Henrik, 1997. "Inflation Targets and Contracts with Uncertain Central Banker Preferences," CEPR Discussion Papers 1562, C.E.P.R. Discussion Papers.
- 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
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.:
- Backus, David & Driffill, John, 1985.
"Inflation and Reputation,"
American Economic Review,
American Economic Association, vol. 75(3), pages 530-38, June.
- Canzoneri, Matthew B & Nolan, Charles & Yates, Anthony, 1997.
"Mechanisms for Achieving Monetary Stability: Inflation Targeting versus the ERM,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 29(1), pages 46-60, February.
- Canzoneri, Matthew B & Nolan, Charles & Yates, Tony, 1996. "Mechanisms for Achieving Monetary Stability: Inflation Targeting Versus the ERM," CEPR Discussion Papers 1418, C.E.P.R. Discussion Papers.
- Herrendorf, Berthold & Lockwood, Ben, 1996.
"Rogoff's Conservative Central Banker Restored,"
The Warwick Economics Research Paper Series (TWERPS)
450, University of Warwick, Department of Economics.
- Stanley Fischer, 1995. "Modern Approaches to Central Banking," NBER Working Papers 5064, National Bureau of Economic Research, Inc.
- Lossani, Marco & Natale, Piergiovanna & Tirelli, Patrizio, 1998. "Incomplete Information in Monetary Policy Games: Rules Rather Than a Conservative Central Banker," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(1), pages 33-47, February.
- Charles Nolan & Eric Schaling, 1996. "Monetary Policy Uncertainty and Central Bank Accountability," Bank of England working papers 54, Bank of England.
- Alesina, Alberto & Gatti, Roberta, 1995. "Independent Central Banks: Low Inflation at No Cost?," American Economic Review, American Economic Association, vol. 85(2), pages 196-200, May.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.