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Monetary policy and central bank behaviour

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Author Info
Manfred Gärtner ()

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Abstract

This paper surveys the state of the art on monetary policy and central bank behaviour from a public choice perspective. After a brief look at the roots of today’s view of monetary policy conduct and institutional design in early work on political business cycles, the inflation-stabilisation dilemma is discussed along with proposed solutions in the form of central bank independence and conservativeness, incentive contracts, and inflation targets. The final section turns to current developments, including the proper choice of policy targets, the role of New Keynesian aggregate-supply curves and the quest for monetary policy rules triggered by the Taylor rule.

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Publisher Info
Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2002 with number 2002-24.

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Length: 34 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:usg:dp2002:2002-24

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Related research
Keywords: Monetary policy; Central banking; Public choice;

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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

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References listed on IDEAS
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  5. Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January. [Downloadable!] (restricted)
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    Other versions:
  12. Svensson, Lars E O, 1995. "Optimal Inflation Targets, 'Conservative' Central Banks, and Linear Inflation Contracts," CEPR Discussion Papers 1249, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  13. Gert Peersman & Frank Smets, 1999. "Uncertainty and the Taylor rule in a simple model of the Euro-area economy," Proceedings, Federal Reserve Bank of San Francisco.
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  15. Christopher J. Waller, 1995. "Performance contracts for central bankers," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 3-14. [Downloadable!]
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  19. Eijffinger, Sylvester C W & Hoeberichts, Marco, 1998. "The Trade off between Central Bank Independence and Conservativeness," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 397-411, July.
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  20. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-84, November. [Downloadable!] (restricted)
  21. Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608.
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  25. Forder, James, 1998. "Central Bank Independence--Conceptual Clarifications and Interim Assessment," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 307-34, July.
  26. Forder, James, 1998. "The case for an independent European central bank: A reassessment of evidence and sources," European Journal of Political Economy, Elsevier, vol. 14(1), pages 53-71, February. [Downloadable!] (restricted)
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  28. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August. [Downloadable!] (restricted)
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  31. William Poole, 1999. "Monetary policy rules?," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 3-12. [Downloadable!]
    Other versions:
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