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Fiscal Policy, Institutional Quality and Central Bank Transparency

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  • Meixing Dai
  • Moïse Sidiropoulos
  • Eleftherios Spyromitros

Abstract

type="main"> This paper examines monetary and fiscal interactions in a framework where the government as Stackelberg leader worries about political costs of corruption and central bank opacity acts as a fiscal disciplinary device. Opacity could reduce (increase) inflation expectations, inflation (the output gap) and the responses of these variables to supply shocks, and would improve social welfare. Under the least favourable assumptions on the effect of corruption, i.e. ‘sanding-the-wheels’ or weak ‘greasing-the-wheels’ effect, opacity has a fiscal disciplining effect that could be reinforced by grand corruption. Intransparency increases corruption only if the ‘greasing-the-wheels’ effect is relatively large.

Suggested Citation

  • Meixing Dai & Moïse Sidiropoulos & Eleftherios Spyromitros, 2015. "Fiscal Policy, Institutional Quality and Central Bank Transparency," Manchester School, University of Manchester, vol. 83(5), pages 523-545, September.
  • Handle: RePEc:bla:manchs:v:83:y:2015:i:5:p:523-545
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    Cited by:

    1. Meixing Dai, 2012. "External Constraint and Financial Crises with Balance Sheet Effects," International Economic Journal, Taylor & Francis Journals, vol. 26(4), pages 567-585, March.
    2. Stephanos Papadamou & Moïse Sidiropoulos & Eleftherios Spyromitros, 2017. "Is There a Role for Central Bank Independence on Public Debt Dynamics?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(1), pages 1-6.
    3. Dai, Meixing & Sidiropoulos, Moïse, 2011. "Monetary and fiscal policy interactions with central bank transparency and public investment," Research in Economics, Elsevier, vol. 65(3), pages 195-208, September.
    4. repec:ove:journl:aid:11272 is not listed on IDEAS
    5. Li Qin & Moïse Sidiropoulos, 2016. "Robustness of Optimal Interest Rate Rules in an Open Economy," Bulletin of Applied Economics, Risk Market Journals, vol. 3(1), pages 29-46.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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