Is It Welfare Improving to Insulate Monetary Policy from the Political Arena?
AbstractThis paper presents a two-party model in which partisan and opportunistic politicians have two options: (i) to reach an agreement with respect to the central banker before elections are held, which leads to elections becoming a toss up, or (ii) to let the citizens vote for their proposed central bankers, which endogenizes the probabilities of being elected. Parties want to appoint their ideal central bankers (partisan), they care about winning the elections (opportunistic), and they are risk-averse about the electoral results. The paper shows that, under some circunstances, both parties may be interested in leaving the appointment of the central banker out of the electoral contest.
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Bibliographic InfoPaper provided by Centro de Estudios Monetarios Y Financieros- in its series Papers with number 9902.
Length: 36 pages
Date of creation: 1999
Date of revision:
Contact details of provider:
Postal: Centro de Estudios Monetarios Y Financieros. Casado del Alisal, 5-28014 Madrid, Spain.
Web page: http://www.cemfi.es/
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CENTRAL BANKS ; PUBLIC POLICY ; MONETARY POLICY ; GAME THEORY;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- 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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