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Credibility and Flexibility with Monetary Policy Committees

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  • Mihov, Ilian
  • Sibert, Anne

Abstract

We consider independent monetary policy committees as a simple way of attaining relatively low inflation without completely sacrificing the stabilization role of monetary policy. If central banker's types are unknown, then for a wide range of parameters an independent monetary policy committee is better than either a mandated zero-inflation rule or discretionary policy conducted by an opportunistic central banker.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3278.

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Date of creation: Mar 2002
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Handle: RePEc:cpr:ceprdp:3278

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Keywords: inflationary bias; monetary policy committee; output stabilization; reputation;

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References

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  1. Christopher J. Waller, 2000. "Policy Boards And Policy Smoothing," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 305-339, February.
  2. Maurice Obstfeld, 1991. "Destabilizing Effects of Exchange-Rate Escape Clauses," NBER Working Papers 3603, National Bureau of Economic Research, Inc.
  3. Anne Sibert, 1999. "Monetary Policy Committees: Individual and Collective Reputations," CESifo Working Paper Series 226, CESifo Group Munich.
  4. Anne Sibert, 2003. "Monetary Policy Committees: Individual and Collective Reputations," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 649-665.
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  10. Gerling, Kerstin & Gruner, Hans Peter & Kiel, Alexandra & Schulte, Elisabeth, 2005. "Information acquisition and decision making in committees: A survey," European Journal of Political Economy, Elsevier, vol. 21(3), pages 563-597, September.
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Cited by:
  1. Willem Buiter, 2004. "A Small Corner of Intertemporal Public Finance - New Developments in Monetary Economics: 2 Ghosts, 2 Eccentricities, A Fallacy, A Mirage and A Mythos," NBER Working Papers 10524, National Bureau of Economic Research, Inc.
  2. Manfred Neumann, 2002. "Transparency in monetary policy," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(4), pages 353-365, December.
  3. Petra Gerlach-Kristen, 2008. "The Role of the Chairman in Setting Monetary Policy: Individualistic vs. Autocratically Collegial MPCs," International Journal of Central Banking, International Journal of Central Banking, vol. 4(3), pages 119-143, September.
  4. Kiel, Alexandra & Gerling, Kerstin & Schulte, Elisabeth & Grüner, Hans Peter, 2003. "Information acquisition and decision making in committees: a survey," Working Paper Series 0256, European Central Bank.
  5. H.J. Roelfsema, 2006. "Why are federal central banks more activist?," Working Papers 06-06, Utrecht School of Economics.
  6. Buiter, Willem H, 2006. "How Robust is the New Conventional Wisdom? The Surprising Fragility of the Theoretical Foundations of Inflation Targeting and Central Bank Independence," CEPR Discussion Papers 5772, C.E.P.R. Discussion Papers.

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