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Central bank independence and conservatism under uncertainty: Substitutes or complements?

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  • Carsten Hefeker

    ()
    (University of Siegen)

  • Blandine Zimmer

    ()
    (University of Strasbourg)

Abstract

This paper revisits the trade-off between central bank independence and conservatism using a New Keynesian model with uncertainty about the central banker's output gap target. It is shown that when this uncertainty is high, the trade-off no longer holds. In this case, the optimal combination between independence and conservatism is characterised by complementarity.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/01-2010_hefeker.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201001.

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Length: 15 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:mar:magkse:201001

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Keywords: Central bank independence; Conservatism; Transparency of monetary policy;

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Citations

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Cited by:
  1. Esteban Colla De Robertis & Last: Colla De Robertis, 2010. "Monetary Committee Size and Special Interest Influence," Documentos de Investigación - Research Papers 2, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
  2. Meixing Dai & Qiao Zhang, 2013. "Central bank transparency with the cost channel," Working Papers of BETA 2013-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. Marco M. Sorge, 2012. "Robust Delegation with Uncertain Monetary Policy Preferences," EERI Research Paper Series EERI_RP_2012_05, Economics and Econometrics Research Institute (EERI), Brussels.

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