How Conservative Does the Central Banker Have to Be? On the Treatment of Expectations under Discretionary Policymaking
AbstractThis paper explores an issue that arises in the delegation process. The paper shows that a myopic central banker, one who treats expectations as constant in setting discretionary policy, can replicate the behavior of output and inflation under policy from a timeless perspective. For that to happen, society must delegate a price level target or a speed limit policy to a central banker who is more weight-conservative than society.
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Bibliographic InfoPaper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 07/04.
Length: 25 pages
Date of creation: 01 Oct 2007
Date of revision:
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New Keynesian Model; Price Level Targeting; Speed Limit Policy; Conservative Central Banker;
Other versions of this item:
- Alfred V Guender, 2009. "How Conservative Does The Central Banker Have To Be? On The Treatment Of Expectations Under Discretionary Policymaking," Australian Economic Papers, Wiley Blackwell, vol. 48(1), pages 34-49, 03.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-10 (All new papers)
- NEP-CBA-2007-11-10 (Central Banking)
- NEP-MAC-2007-11-10 (Macroeconomics)
- NEP-MON-2007-11-10 (Monetary Economics)
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.:
- Vestin, David, 2000. "Price-level Targeting versus Inflation Targeting in a Forward-looking Model," Working Paper Series 106, Sveriges Riksbank (Central Bank of Sweden).
- Henrik Jensen, .
"Targeting Nominal Income Growth or Inflation?,"
EPRU Working Paper Series
99-23, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- McCallum, Bennett T., 1983.
"On non-uniqueness in rational expectations models : An attempt at perspective,"
Journal of Monetary Economics,
Elsevier, vol. 11(2), pages 139-168.
- Bennett T. McCallum, 1983. "On Non-Uniqueness in Rational Expectations Models: An Attempt at Perspective," NBER Working Papers 0684, National Bureau of Economic Research, Inc.
- Bennett T. McCallum & Edward Nelson, 2004.
"Timeless perspective vs. discretionary monetary policy in forward-looking models,"
Federal Reserve Bank of St. Louis, issue Mar, pages 43-56.
- Bennett T. McCallum & Edward Nelson, 2000. "Timeless Perspectives vs. Discretionary Monetary Policy In Forward-Looking Models," NBER Working Papers 7915, National Bureau of Economic Research, Inc.
- McCallum, Bennett T & Nelson, Edward, 2001. "Timeless Perspective Vs Discretionary Monetary Policy in Forward-Looking Models," CEPR Discussion Papers 2752, C.E.P.R. Discussion Papers.
- Michael Woodford, 1999. "Commentary : how should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 277-316.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Albert Yee).
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