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Does Conservatism Matter? A Time Series Approach to Central Banking

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  • Helge Berger
  • Ulrich Woitek

Abstract

Rogoff’s "conservative central banker" has received a lot of attention recently. As a rule, central bank independence and inflation seem to be negatively correlated across countries. But the cross-country approach has been criticized for its reliance on legal measures and the measures’ possible endogeneity. We present an alternative test of whether conservatism in monetary policy matters based on generalized impulse response functions for the case of the German Bundesbank. It turns out that more conservative council majorities do indeed follow a more inflation-averse policy. We find the results very robust with regard to changes in the exchange rate regime, government/central bank conflicts, and the partisan composition of the government.

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Bibliographic Info

Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 9814.

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Date of revision: May 1999
Handle: RePEc:gla:glaewp:9814

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Web page: http://www.gla.ac.uk/schools/business/research/
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Keywords: Central Bank Independence; Conservative Central Banker; Monetary Policy; Conflicts; Generalized Impulse Responses;

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Cited by:
  1. Miguel Rueda, 2008. "Breaking Credibility in Monetary Policy: The Role of Politics in the Stability of the Central Banker," Research Department Publications 4585, Inter-American Development Bank, Research Department.
  2. Berger, Helge & Harjes, Thomas, 2008. "Does global liquidity matter for monetary policy in the Euro area?," Discussion Papers 2008/13, Free University Berlin, School of Business & Economics.
  3. Helge Berger & Jakob Haan, 2002. "Are small countries too powerful within the ECB?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(3), pages 263-282, September.
  4. Miguel Rueda, 2008. "Credibilidad en la política monetaria: Papel de políticas en la estabilidad del Presidente del Banco Central," Research Department Publications 4586, Inter-American Development Bank, Research Department.

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