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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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    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. Berger, Helge & Jensen, Henrik & Schjelderup, Guttorm, 2001. "To peg or not to peg?: A simple model of exchange rate regime choice in small economies," Economics Letters, Elsevier, Elsevier, vol. 73(2), pages 161-167, November.
    2. Anita Tuladhar, 2005. "Governance Structures and Decision-Making Roles in Inflation-Targeting Central Banks," IMF Working Papers 05/183, International Monetary Fund.
    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, Blackwell Publishing, vol. 33(2), pages 179-204, May.
    4. 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, Elsevier, vol. 58(5-6), pages 373-391.
    5. Castrén, Olli, 1998. "Monetary Policy Delegation, Labour Market Structure and Fiscal-Monetary Policy Coordination," Research Discussion Papers, Bank of Finland 14/1998, Bank of Finland.
    6. Domenico D’Amico, 2007. "Buchanan on monetary constitutions," Constitutional Political Economy, Springer, Springer, vol. 18(4), pages 301-318, December.
    7. Rousseau, Peter L. & Yilmazkuday, Hakan, 2009. "Inflation, financial development, and growth: A trilateral analysis," Economic Systems, Elsevier, Elsevier, vol. 33(4), pages 310-324, December.
    8. Erwin Jericha & Martin Schürz, 2006. "A Deliberative Independent Central Bank," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 133, Oesterreichische Nationalbank (Austrian Central Bank).
    9. repec:bor:iserev:v:10:y:2010:i:38:p:43-62 is not listed on IDEAS
    10. Beetsma, Roel M W J & Jensen, Henrik, 1998. "Inflation Targets and Contracts with Uncertain Central Banker Preferences," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 30(3), pages 384-403, August.
    11. repec:onb:oenbwp:y::i:133:b:1 is not listed on IDEAS
    12. Bryan Chapple, 2006. "Monetary policy strategies and credibility - theory and practice," DNB Occasional Studies, Netherlands Central Bank, Research Department 404, Netherlands Central Bank, Research Department.
    13. repec:bor:iserev:v:10:y:2010:i:38:p:1-24 is not listed on IDEAS
    14. Gartner, Manfred, 2000. " Political Macroeconomics: A Survey of Recent Developments," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 14(5), pages 527-61, December.
    15. repec:bor:iserev:v:10:y:2010:i:38:p:25-42 is not listed on IDEAS
    16. Peter L. Rousseau & Hakan Yilmazkuday, 2009. "Inflation, Finance, and Growth: A Trilateral Analysis," Vanderbilt University Department of Economics Working Papers, Vanderbilt University Department of Economics 0916, Vanderbilt University Department of Economics.

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