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A theory of Central Bank accountability

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

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Abstract

This paper develops a theory of central bank accountability. Two aspects of accountability are considered. The first one is transparency of actual monetary policy, the second aspect is the question of who bears final responsibility for monetary policy. Monetary policy is transparent if there is little uncertainty about the central bankers preferences. Transparency enhances the central bank's accountability. Another way to make the central bank accountable is to shift final responsibility for monetary policy in the direction of the government. This can be achieved by making the cost of overriding the central bank lower. The paper shows that accountability through transparency leads to a lower expected rate of inflation and less stabilization of supply shocks. Accountability through shifting final responsibility in the direction of the government leads to higher inflationary expectations and more stabilization of supply shocks.

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Publisher Info
Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 103.

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Date of creation: 1998
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Handle: RePEc:dgr:kubcen:1998103

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Related research
Keywords: accountability

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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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. 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)
  2. 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)
  3. Haan, J. de & Amtenbrink, F. & Eijffinger, S.C.W., 1998. "Accountability of central banks : aspects and quantification," Discussion Paper 54, Tilburg University, Center for Economic Research. [Downloadable!]
  4. Charles Nolan & Eric Schaling, . "Monetary Policy Uncertainty and Central Bank Accountability," Bank of England working papers 54, Bank of England.
  5. Helge Berger & Marcel Thum, 2000. "News Management in Monetary Policy: When Central Banks Should Talk to the Government," German Economic Review, Blackwell Publishing, vol. 1(4), pages 465-493, November. [Downloadable!] (restricted)
  6. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 195-225. [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. Alberto Alesina & Romain Wacziarg, 1999. "Is Europe Going Too Far?," NBER Working Papers 6883, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Mike Artis, 2002. "The Performance of the European Central Bank," International Review of Applied Economics, Taylor and Francis Journals, vol. 16(1), pages 19-29, January. [Downloadable!] (restricted)
  3. Menno Middeldorp & Clemens Kool & Stephanie Rosenkranz, 2007. "Listening Without Understanding," Working Papers 07-19, Utrecht School of Economics. [Downloadable!]
  4. Eijffinger, Sylvester C. W. & Hoeberichts, Marco M., 2000. "Central Bank accountability and transparency : theory and some evidence," Discussion Paper Series 1: Economic Studies 2000,06, Deutsche Bundesbank, Research Centre. [Downloadable!]
    Other versions:
  5. Siklos, Pierre L., 2000. "Monetary policy transparency, public commentary, and market perceptions about monetary policy in Canada," Discussion Paper Series 1: Economic Studies 2000,08, Deutsche Bundesbank, Research Centre. [Downloadable!]
  6. Pierre L. Siklos, 2003. "Assessing the Impact of Changes in Transparency and Accountability at the Bank of Canada," Canadian Public Policy, University of Toronto Press, vol. 29(3), pages 279-299, September. [Downloadable!] (restricted)
  7. Alessandro Gambini & Marco Arnone & Salim M. Darbar, 2007. "Banking Supervision: Quality and Governance," IMF Working Papers 07/82, International Monetary Fund. [Downloadable!]
  8. Francesca Castellani, 2001. "Central Bank Independence and Accountability Under Complete Information," HEI Working Papers 05-2001, Economics Section, The Graduate Institute of International Studies. [Downloadable!]
  9. Helge Berger & Michael Ehrmann & Marcel Fratzscher, 2006. "Monetary policy in the media," Working Paper Series 679, European Central Bank. [Downloadable!]
  10. N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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