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Policy Boards And Policy Smoothing

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Author Info
Christopher J. Waller

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Abstract

Partisan politics and random election outcomes generate policy uncertainty and partisan business cycles. To reduce policy uncertainty, society must design the policy-making environment to overcome electoral uncertainty and partisanship. I show that delegating policy to an independent policy board with discretionary powers will produce substantial policy smoothing and lower policy uncertainty relative to a simple model in which elected officials set policy. Board members are chosen in a partisan, noncooperative environment; yet in the benchmark model, policy variability is eliminated, and the cooperative bargaining solution is replicated. © 2000 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Publisher Info
Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 115 (2000)
Issue (Month): 1 (February)
Pages: 305-339
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Handle: RePEc:tpr:qjecon:v:115:y:2000:i:1:p:305-339

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  2. Alberto Alesina & Alberto Carrasquilla & RobertoSteiner, 2000. "The Central Bank in Colombia," WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO 003568, FEDESARROLLO. [Downloadable!]
  3. Etienne Farvaque & Norimichi Matsueda & Pierre-Guillaume Méon, 2008. "How monetary policy committees impact the volatility of policy rates," Working Papers CEB 08-026.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
  4. RIBONI, Alessandro & RUGE-MURCIA, Francisco, 2006. "The Dynamic (In)efficiency of Monetary Policy by Committee," Cahiers de recherche 2006-02, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
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  5. Anne Sibert, 2006. "Central Banking by Committee," DNB Working Papers 091, Netherlands Central Bank, Research Department. [Downloadable!]
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  6. Etienne Farvaque & Norimichi Matsueda & Pierre-Guillaume Méon, 2007. "How committees reduce the volatility of policy rates," Working Papers DULBEA 07-11.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA). [Downloadable!]
  7. Corinne Aaron-Cureau & Hubert Kempf, 2004. "Bargaining over monetary policy in a monetary union and the case for appointing an independent central banker," Money Macro and Finance (MMF) Research Group Conference 2004 85, Money Macro and Finance Research Group. [Downloadable!]
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  8. Helge Berger, 2006. "Optimal Central Bank Design: Benchmarks for the ECB," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  9. James Bullard & Christopher J. Waller, 2002. "Central bank design in general equilibrium," Working Papers 1998-002, Federal Reserve Bank of St. Louis. [Downloadable!]
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  10. Berthold Herrendorf & Manfred J.M. Neumann, 2003. "The Political Economy of Inflation, Labour Market Distortions and Central Bank Independence," Economic Journal, Royal Economic Society, vol. 113(484), pages 43-64, January. [Downloadable!] (restricted)
  11. Gersbach, Hans & Hahn, Volker, 2005. "Voting Transparency in a Monetary Union," CEPR Discussion Papers 5155, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Ernesto Dal Bo, 2002. "Supermajority Voting Rules: Balancing Commitment and Flexibility," Economics Series Working Papers 132, University of Oxford, Department of Economics. [Downloadable!]
  13. Ernesto Dal Bo, 2000. "Bribing Voters," Economics Series Working Papers 039, University of Oxford, Department of Economics. [Downloadable!]
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