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Supply-Side Fiscal Policy, Conservativeness, And Central Bank Transparency

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Author Info
Giuseppe Ciccarone
Giovanni Di Bartolomeo
Enrico Marchetti

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Abstract

This paper focuses on the “contingent” view of transparency. By introducing endogenous fiscal policy and labour market distortions, it studies the effects the uncertainty in central bank’s (CB) preferences on the behaviour of wage and fiscal authorities and thus on output and inflation. We consider the problem on both positive and normative perspectives. First, we investigate the effects of a given degree of uncertainty in CB’s preferences on inflation and real output. Second, in line with recent literature, by assuming the possibility that information on CB’s preferences may be an endogenous variable, we study the optimal degree of transparency from the CB’s viewpoint. Although a general analysis is presented, we focus on the case of a small-bounded variance of CB’s preference, i.e. we assume that the CB’s power of affecting information disclosure and influencing private beliefs is limited.

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Publisher Info
Paper provided by Sapienza University of Rome, Department of Public Economics in its series Working Papers with number 77.

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Length: 32 pages
Date of creation: Feb 2005
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Handle: RePEc:sap:wpaper:77

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Related research
Keywords: Central bank transparency; Communication; Inflation uncertainty.;

Find related papers by JEL classification:
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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