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Policy Games and the Optimal Design of Central Banks

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Author Info
Andrew Hughes Hallett () (Department of Economics, Vanderbilt University)
Diana N. Weymark () (Department of Economics, Vanderbilt University)

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Abstract

This article studies the impact of alternative institutional configurations on economic performance when there is strategic interaction between the government and the central bank. The interaction between the fiscal and monetary authorities is modeled as a non-cooperative two-stage game. The institutions within which monetary and fiscal policies are implemented are represented by the degree of central bank independence, the degree of central bank conservatism, and the relative timing of fiscal and monetary policies. The four representative regimes considered capture the distinguishing features of monetary institutions in the United States, Switzerland, the European Union, and the United Kingdom.

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File URL: http://www.vanderbilt.edu/Econ/wparchive/workpaper/vu02-w20.pdf
File Format: application/pdf
File Function: First version, 2002
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Publisher Info
Paper provided by Department of Economics, Vanderbilt University in its series Working Papers with number 0220.

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Date of creation: Aug 2002
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Handle: RePEc:van:wpaper:0220

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Web page: http://sitemason.vanderbilt.edu/econ/
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Related research
Keywords: Central bank design; central bank independence; monetary policy delegation; policy coordination; policy game;

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Find related papers by JEL classification:
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

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Andrew Hughes Hallett & Diana N. Weymark, 2001. "The Cost of Heterogeneity in a Monetary Union," Working Papers 0128, Department of Economics, Vanderbilt University. [Downloadable!]
    Other versions:
  2. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121. [Downloadable!] (restricted)
    Other versions:
  3. Demertzis, Maria & Hughes Hallett, Andrew & Viegi, Nicola, 2004. "An independent central bank faced with elected governments," European Journal of Political Economy, Elsevier, vol. 20(4), pages 907-922, November. [Downloadable!] (restricted)
    Other versions:
  4. Alesina, Alberto & Gatti, Roberta, 1995. "Independent Central Banks: Low Inflation at No Cost?," American Economic Review, American Economic Association, vol. 85(2), pages 196-200, May. [Downloadable!] (restricted)
  5. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-34, June.
  6. Jordi Gali & Tommaso Monacelli, 2002. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," NBER Working Papers 8905, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Barro, Robert J, 1981. "Output Effects of Government Purchases," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1086-1121, December. [Downloadable!] (restricted)
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  8. Fischer, Stanley, 1995. "Central-Bank Independence Revisited," American Economic Review, American Economic Association, vol. 85(2), pages 201-06, May.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andrew Hughes Hallett, 2004. "Post-Thatcher Fiscal Strategies in the U.K.: An Interpretation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Andrew Hughes Hallett, 2008. "Sustainable fiscal policies and budgetary risk under alternative monetary policy arrangements," Economic Change and Restructuring, Springer, vol. 41(1), pages 1-28, March. [Downloadable!] (restricted)
  3. Andrew Hughes Hallett & Diana N. Weymark, 2002. "Government Leadership and Central Bank Design," Working Papers 0208, Department of Economics, Vanderbilt University, revised Dec 2004. [Downloadable!]
    Other versions:
  4. Hughes Hallett, Andrew, 2005. "In Praise of Fiscal Restraint and Debt Rules. What the Euro Zone Might Do Now," CEPR Discussion Papers 5043, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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