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The Trade Off Between Central Bank Independence and Conservativeness

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  • Eijffinger, S.C.W.
  • Hoeberichts, M.M.

    (Tilburg University, Center for Economic Research)

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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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1996-44.

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

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Web page: http://center.uvt.nl

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Keywords: central banks; independence; conservativeness;

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  1. 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.
  2. Eijffinger, S.C.W. & Schaling, E., 1995. "The ultimate determinants of central bank independence," Discussion Paper 1995-5, Tilburg University, Center for Economic Research.
  3. Manfred Neumann, 1991. "Precommitment by central bank independence," Open Economies Review, Springer, vol. 2(2), pages 95-112, June.
  4. Eijffinger, S.C.W., 1997. "Optimal commitment in an open economy: Credibility vs. flexibility," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152942, Tilburg University.
  5. Cukierman Alex, 1992. "Central Bank Strategy, Credibility, And Independance: Theory And Evidence," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 10, December.
  6. Eijffinger, S-C-W & de Haan, J, 1996. "The Political Economy of Central-Bank Independence," Princeton Studies in International Economics 19, International Economics Section, Departement of Economics Princeton University,.
  7. Alberto Alesina, 1988. "Macroeconomics and Politics," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 13-62 National Bureau of Economic Research, Inc.
  8. Haizhou Huang & Michele Fratianni, 1995. "Central Bank Reputation and Conservativeness," FMG Discussion Papers dp216, Financial Markets Group.
  9. Eijffinger, S. & van Keulen, M., 1994. "Central Bank Independence in Another Eleven Countries," Papers 9494, Tilburg - Center for Economic Research.
  10. Eijffinger, S.C.W. & Schaling, E., 1992. "Central bank independence: Criteria and indices," Research Memorandum 548, Tilburg University, Faculty of Economics and Business Administration.
  11. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
  12. 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.
  13. Eijffinger, S.C.W., 1993. "Central bank independence in twelve industrial countries," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152908, Tilburg University.
  14. 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.
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