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How Conservative Does The Central Banker Have To Be? On The Treatment Of Expectations Under Discretionary Policymaking

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  • ALFRED V GUENDER

Abstract

This paper explores an issue that arises in the delegation process. The paper shows that a myopic central banker, one who treats expectations as constant in setting discretionary policy, can replicate the behaviour of output and inflation under policy from a timeless perspective. For that to happen, society must delegate a price level target or a speed limit policy to a central banker who is more weight‐conservative than society.

Suggested Citation

  • Alfred V Guender, 2009. "How Conservative Does The Central Banker Have To Be? On The Treatment Of Expectations Under Discretionary Policymaking," Australian Economic Papers, Wiley Blackwell, vol. 48(1), pages 34-49, March.
    • Handle: RePEc:bla:ausecp:v:48:y:2009:i:1:p:34-49
    DOI: 10.1111/j.1467-8454.2009.00362.x
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    References listed on IDEAS

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    1. repec:bla:manchs:v:67:y:1999:i:0:p:1-35 is not listed on IDEAS
    2. Michael Woodford, 1999. "Commentary : how should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 277-316.
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    7. Michael Woodford, 1999. "Optimal Monetary Policy Inertia," Manchester School, University of Manchester, vol. 67(s1), pages 1-35.
    8. Bennett T. McCallum & Edward Nelson, 2004. "Timeless perspective vs. discretionary monetary policy in forward-looking models," Review, Federal Reserve Bank of St. Louis, vol. 86(Mar), pages 43-56.
    9. Froyen, Richard T. & Guender, Alfred V., 2014. "Price level targeting and the delegation issue in an open economy," Economics Letters, Elsevier, vol. 122(1), pages 12-15.
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    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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