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The trade off between central bank independence and conservativeness

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Author Info
Eijffinger, S.C.W.
Hoeberichts, M. (Tilburg University, Center for Economic Research)

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Abstract

This paper introduces a parameter for central bank independence in a monetary policy game with a conservative central banker. It tries to explain the optimal degree of central bank independence and conservativeness by four economic and political determinants, both theoretically and empirically. There appears to be a trade off between central bank independence and conservativeness. Then, by comparing the optimal degree of conservativeness and independence with the actual degree of independence, we want to identify the optimal degree of conservativeness for the countries participating in EMU.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 44.

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Date of creation: 1996
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Handle: RePEc:dgr:kubcen:199644

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Keywords: conservativeness;

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References listed on IDEAS
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.:
  1. Eijffinger, S. & Schaling, E., 1995. "The Ultimate Determinants of Central Bank Independence," Discussion Paper 5, Tilburg University, Center for Economic Research. [Downloadable!]
  2. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November. [Downloadable!] (restricted)
  3. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March. [Downloadable!] (restricted)
  4. Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
    Other versions:
  5. Aigner, Dennis J. & Hsiao, Cheng & Kapteyn, Arie & Wansbeek, Tom, 1984. "Latent variable models in econometrics," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 23, pages 1321-1393 Elsevier. [Downloadable!] (restricted)
  6. Eijffinger, S. & van Keulen, M., 1994. "Central Bank Independence in Another Eleven Countries," Papers 9494, Tilburg - Center for Economic Research.
  7. Sylvester Eijffinger & Eric Schaling, . "Optimal Commitment in an Open Economy: Credibility vs. Flexibility," Bank of England working papers 41, Bank of England.
    Other versions:
  8. de Haan, Jakob & van 't Hag, Gert Jan, 1995. " Variation in Central Bank Independence across Countries: Some Provisional Empirical Evidence," Public Choice, Springer, vol. 85(3-4), pages 335-51, December.
  9. Haizhou Huang & Michele Fratianni, 1995. "Central Bank Reputation and Conservativeness," FMG Discussion Papers dp216, Financial Markets Group. [Downloadable!] (restricted)
  10. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc. [Downloadable!]
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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.)

  1. W.H. Verhagen & S.C.W. Eijffinger, 2001. "Flexible Inflation Targeting under a Non-Linear Phillipscurve," WO Research Memoranda (discontinued) 663, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  2. Berger, Helge & Woitek, Ulrich, 1999. "Does Conservatism Matter? A Time Series Approach to Central Banking," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Hughes Hallett, Andrew & Weymark, Diana, 2002. "Independence before Conservatism: Transparency, Politics and Central Bank Design," CEPR Discussion Papers 3336, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. 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!]
    Other versions:
  5. Thomas Jordan, 2001. "Monetary control uncertainty and inflation bias," Journal of Economics, Springer, vol. 73(2), pages 125-147, June. [Downloadable!] (restricted)
  6. Manfred Gärtner, 2006. "The political economy of monetary policy conduct and central bank design," University of St. Gallen Department of Economics working paper series 2006 2006-25, Department of Economics, University of St. Gallen. [Downloadable!]
  7. Jorg Bibow, . "Reflections on the Current Fashion for Central Bank Independence," Economics Working Paper Archive 334, Levy Economics Institute, The. [Downloadable!]
  8. Berger, Helge & Sturm, Jan-Egbert & Haan, Jakob de, 2000. "An Empirical Investigation into Exchange Rate Regime Choice and Exchange Rate Volatility," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  9. Bernd Hayo & Carsten Hefeker, 2001. "Do We Really Need Central Bank Independence? A Critical Re- examination," Macroeconomics 0103006, EconWPA. [Downloadable!]
  10. Moser, Christoph / Dreher, Axel, 2007. "Do Markets Care about Central Bank Governor Changes? Evidence from Emerging Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  11. Diana N. Weymark, 2005. "Inflation, Government Transfers, and Optimal Central Bank Independence," Working Papers 0502, Department of Economics, Vanderbilt University. [Downloadable!]
  12. Jörg Bibow, 2001. "Reflections on the Current Fashion For Central Bank Independence," Macroeconomics 0108004, EconWPA. [Downloadable!]
  13. Manfred Gärtner, 2002. "Monetary policy and central bank behaviour," University of St. Gallen Department of Economics working paper series 2002 2002-24, Department of Economics, University of St. Gallen. [Downloadable!]
  14. Ali al-Nowaihi & Paul Levine & Alex Mandilaras, 2006. "Central Bank Independence and the `Free Lunch Puzzle': A New Perspective," Department of Economics Discussion Papers 0806, Department of Economics, University of Surrey. [Downloadable!]
  15. Helmut Wagner, 2001. "Implications of Globalization for Monetary Policy," IMF Working Papers 01/184, International Monetary Fund. [Downloadable!]
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