IDEAS home Printed from https://ideas.repec.org/a/ecj/econjl/v106y1996i435p345-58.html
   My bibliography  Save this article

The Choice of 'Conservative' Bankers in Open Economies: Monetary Regime Options for Europe

Author

Listed:
  • Currie, David
  • Levine, Paul
  • Pearlman, Joseph

Abstract

That governments should delegate the operation of monetary policy to independent central banks is widely advocated. For a closed economy, the optimal choice results in a banker who is more conservative than the representative government, assigning a lower weight on output in her welfare function, but not overconservative, thereby allowing monetary policy to adjust to shocks. However, for open economies, the exchange rate externality results in an inefficient Nash equilibrium to this 'delegation game.' Monetary union or cooperation in the optimal choice of banker can internalize the externality. These options are assessed under symmetric and asymmetric shocks assuming different levels of fiscal transfers. Copyright 1996 by Royal Economic Society.

Suggested Citation

  • Currie, David & Levine, Paul & Pearlman, Joseph, 1996. "The Choice of 'Conservative' Bankers in Open Economies: Monetary Regime Options for Europe," Economic Journal, Royal Economic Society, vol. 106(435), pages 345-358, March.
  • Handle: RePEc:ecj:econjl:v:106:y:1996:i:435:p:345-58
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0013-0133%28199603%29106%3A435%3C345%3ATCO%60BI%3E2.0.CO%3B2-P&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jensen, Henrik, 2000. "Optimal monetary policy cooperation through state-independent contracts with targets," European Economic Review, Elsevier, vol. 44(3), pages 517-539, March.
    2. Paul Levine & Joseph Pearlman, 2002. "Delegation and Fiscal Policy in the Open Economy: More Bad News for Rogoff's Delegation Game," Open Economies Review, Springer, vol. 13(2), pages 153-174, April.
    3. Paul Levine & Joseph Pearlman & Richard Pierse, 2007. "Monetary Policy Coordination Revisited in a Two-Bloc DSGE Model," School of Economics Discussion Papers 0907, School of Economics, University of Surrey.
    4. Currie, David & Levine, Paul L & Rickman, Neil, 1999. "Delegation and the Ratchet Effect: Should Regulators Be Pro-Industry?," CEPR Discussion Papers 2274, C.E.P.R. Discussion Papers.
    5. Laurence H. Meyer & Brian M. Doyle & Joseph E. Gagnon & Dale W. Henderson, 2002. "International coordination of macroeconomic policies: still alive in the new millennium?," International Finance Discussion Papers 723, Board of Governors of the Federal Reserve System (U.S.).
    6. Paul Levine & Joseph Pearlman & Bo Yang, 2008. "The Credibility Problem Revisited: Thirty Years on from Kydland and Prescott," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 728-746, September.
    7. Spagnolo, G., 1999. "Issue Linkage, Delegation, and International Policy Cooperation," Cambridge Working Papers in Economics 9913, Faculty of Economics, University of Cambridge.
    8. Ali al-Nowaihi & Paul Levine & Alex Mandilaras, 2006. "Central Bank Independence and the `Free Lunch Puzzle': A New Perspective," School of Economics Discussion Papers 0806, School of Economics, University of Surrey.
    9. al-Nowaihi, Ali & Levine, Paul, 1998. "Can political monetary cycles be avoided?," Journal of Monetary Economics, Elsevier, vol. 42(3), pages 525-545, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:106:y:1996:i:435:p:345-58. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/resssea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.