Government Leadership and Central Bank Design
AbstractThis article investigates the impact on economic performance of the timing of moves in a policy game between the government and the central bank for a government with both distributional and stabilization objectives. It is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared to a regime in which monetary and fiscal policy is determined simultaneously. Further, it is shown that government leadership benefits both the fiscal and monetary authorities. The implications of these results for a country deciding whether to join a monetary union are also considered.
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Bibliographic InfoPaper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0208.
Date of creation: May 2002
Date of revision: Dec 2004
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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html
Central bank independence; monetary policy delegation; policy coordination; policy game; policy leadership;
Other versions of this item:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-06 (All new papers)
- NEP-CBA-2005-02-06 (Central Banking)
- NEP-MAC-2005-02-06 (Macroeconomics)
- NEP-MON-2005-02-06 (Monetary Economics)
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