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Does Conservatism Matter? A Time Series Approach to Central Banking

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Author Info
Helge Berger
Ulrich Woitek

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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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Paper provided by Department of 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/departments/economics/

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Related research
Keywords: Central Bank Independence Conservative Central Banker Monetary Policy Conflicts Generalized Impulse Responses

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models

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