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Modern Approaches to Central Banking

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  • Stanley Fischer
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    Abstract

    Modern theory has delivered both the conservative central banker and the principal-agent approaches as rationales for the independence of the central bank. The principal-agent approach directs attention to the importance of both clearly defining the goals of the central bank and its command in order to meet the targets assigned to it. The empirical evidence shows not only that greater independence is associated with lower inflation, but also that the central bank's rights not to finance the government and to set interest rates independently increase its effectiveness. The role of inflation targeting and the distinction between price level and inflation targeting are also analyzed.

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    File URL: http://www.nber.org/papers/w5064.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5064.

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    Date of creation: Mar 1995
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    Handle: RePEc:nbr:nberwo:5064

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    Cited by:
    1. Gartner, Manfred, 2000. " Political Macroeconomics: A Survey of Recent Developments," Journal of Economic Surveys, Wiley Blackwell, vol. 14(5), pages 527-61, December.
    2. Erwin Jericha & Martin Schürz, 2006. "A Deliberative Independent Central Bank," Working Papers 133, Oesterreichische Nationalbank (Austrian Central Bank).
    3. Beetsma, Roel M W J & Bovenberg, A Lans, 2001. "The Optimality of a Monetary Union without a Fiscal Union," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 179-204, May.
    4. Domenico D’Amico, 2007. "Buchanan on monetary constitutions," Constitutional Political Economy, Springer, vol. 18(4), pages 301-318, December.
    5. Beetsma, Roel & Jensen, Henrik, 1997. "Inflation Targets and Contracts with Uncertain Central Banker Preferences," CEPR Discussion Papers 1562, C.E.P.R. Discussion Papers.
    6. repec:onb:oenbwp:y::i:133:b:1 is not listed on IDEAS
    7. repec:bor:iserev:v:10:y:2010:i:38:p:1-24 is not listed on IDEAS
    8. Castrén, Olli, 1998. "Monetary Policy Delegation, Labour Market Structure and Fiscal-Monetary Policy Coordination," Research Discussion Papers 14/1998, Bank of Finland.
    9. Helge Berger & Henrik Jensen & Guttorm Schjelderup, 2001. "To Peg or Not To Peg? A Simple Model of Exchange Rate Regime Choice In Small Economies," CESifo Working Paper Series 468, CESifo Group Munich.
    10. repec:bor:iserev:v:10:y:2010:i:38:p:25-42 is not listed on IDEAS
    11. Rousseau, Peter L. & Yilmazkuday, Hakan, 2009. "Inflation, financial development, and growth: A trilateral analysis," Economic Systems, Elsevier, vol. 33(4), pages 310-324, December.
    12. Anita Tuladhar, 2005. "Governance Structures and Decision-Making Roles in Inflation-Targeting Central Banks," IMF Working Papers 05/183, International Monetary Fund.
    13. Peter L. Rousseau & Hakan Yilmazkuday, 2009. "Inflation, Finance, and Growth: A Trilateral Analysis," Vanderbilt University Department of Economics Working Papers 0916, Vanderbilt University Department of Economics.
    14. repec:bor:iserev:v:10:y:2010:i:38:p:43-62 is not listed on IDEAS
    15. Guender, Alfred V. & Oh, Do Yoon, 2006. "Price stability through price-level targeting or inflation targeting? A tale of two experiments," Journal of Economics and Business, Elsevier, vol. 58(5-6), pages 373-391.
    16. Bryan Chapple, 2006. "Monetary policy strategies and credibility - theory and practice," DNB Occasional Studies 404, Netherlands Central Bank, Research Department.

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