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Credibility and Flexibility with Monetary Policy Committees

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Author Info
Ilian Mihov (INSEAD, CEPR)
Anne Sibert (Birkbeck College, University of London, CEPR)

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Abstract

We consider independent monetary policy committees as a simple way of attaining relatively low inflation without completely sacrificing an activist role of monetary policy. If central banker¡¦s types are unknown, then for a wide range of parameters an independent monetary policy committee is better than either a mandated zero-inflation rule or discretionary policy conducted by an opportunistic central banker.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 232002.

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Length: 25 pages
Date of creation: Dec 2002
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Handle: RePEc:hkm:wpaper:232002

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Find related papers by JEL classification:
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
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

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. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August. [Downloadable!] (restricted)
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  3. Avinash Dixit & Henrik Jensen, 2000. "Equilibrium Contracts for the Central Bank of a Monetary Union," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Bennett T. McCallum, 1995. "Two Fallacies Concerning Central Bank Independence," NBER Working Papers 5075, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May. [Downloadable!] (restricted)
  6. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August. [Downloadable!] (restricted)
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  7. 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)
  8. Alan S. Blinder & John Morgan, 2000. "Are Two Heads Better Than One?: An Experimental Analysis of Group vs. Individual Decisionmaking," NBER Working Papers 7909, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September. [Downloadable!] (restricted)
  10. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January. [Downloadable!] (restricted)
  11. Sibert, Anne, 1999. "Monetary Policy Committees: Individual and Collective Reputations," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  12. Sibert, Anne, 2001. "Monetary Policy With Uncertain Central Bank Preferences," CEPR Discussion Papers 3113, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Vickers, John, 1986. "Signalling in a Model of Monetary Policy with Incomplete Information," Oxford Economic Papers, Oxford University Press, vol. 38(3), pages 443-55, November. [Downloadable!] (restricted)
  14. Dixit, Avinash & Lambertini, Luisa, 2003. "Symbiosis of monetary and fiscal policies in a monetary union," Journal of International Economics, Elsevier, vol. 60(2), pages 235-247, August. [Downloadable!] (restricted)
  15. Lars E.O. Svensson, 1997. "Optimal Inflation Targets, `Conservative' Central Banks, and Linear Inflation Contracts," NBER Working Papers 5251, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-38, June. [Downloadable!] (restricted)
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Full references

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. Willem Buiter, 2004. "A Small Corner of Intertemporal Public Finance - New Developments in Monetary Economics: 2 Ghosts, 2 Eccentricities, A Fallacy, A Mirage and A Mythos," NBER Working Papers 10524, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Manfred Neumann, 2002. "Transparency in monetary policy," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(4), pages 353-365, December. [Downloadable!] (restricted)
  3. Petra Gerlach-Kristen, 2008. "The Role of the Chairman in Setting Monetary Policy: Individualistic vs. Autocratically Collegial MPCs," International Journal of Central Banking, International Journal of Central Banking, vol. 4(3), pages 119-143, September. [Downloadable!]
  4. Buiter, Willem H, 2006. "How Robust is the New Conventional Wisdom? The Surprising Fragility of the Theoretical Foundations of Inflation Targeting and Central Bank Independence," CEPR Discussion Papers 5772, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Hein Roelfsema, 2006. "Why are federal central banks more activist?," Working Papers 06-06, Utrecht School of Economics. [Downloadable!]
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