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Monetary policy with uncertain central bank preferences

  • Sibert, Anne

?This Paper considers monetary policy when the weight policy makers put on output loss relative to inflation is their private information. I show that in the first period of a two-period term, all policy makers but the least inflation averse inflate less – but respond more to shocks – than if there were no private information. Moderately inflation-averse policy makers may reduce their inflation most. A tendency toward increased conservatism in their second period increases inflation in the first. The model is extended to T-period terms, T

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 46 (2002)
Issue (Month): 6 (June)
Pages: 1093-1109

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Handle: RePEc:eee:eecrev:v:46:y:2002:i:6:p:1093-1109
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  1. Clive Briault & Andrew Haldane & Mervyn King, 1996. "Independence and Accountability," Bank of England working papers 49, Bank of England.
  2. Jon Faust & Lars E. O. Svensson, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," NBER Working Papers 6452, National Bureau of Economic Research, Inc.
  3. Anne Sibert, 1999. "Monetary Policy Committees: Individual and Collective Reputations," CESifo Working Paper Series 226, CESifo Group Munich.
  4. Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, vol. 55(6), pages 1349-65, November.
  5. Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
  6. Dixit, Avinash & Lambertini, Luisa, 2003. "Symbiosis of monetary and fiscal policies in a monetary union," Journal of International Economics, Elsevier, vol. 60(2), pages 235-247, August.
  7. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
  8. Paul Milgrom & John Roberts, 1998. "Limit Pricing and Entry Under Incomplete Information: An Equilibrium Analysis," Levine's Working Paper Archive 245, David K. Levine.
  9. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  10. Steven A. Matthews & Leonard J. Mirman, 1981. "Equilibrium Limit Pricing: The Effects of Private Information and Stochastic Demand," Discussion Papers 494, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Carlsson, Hans & Dasgupta, Sudipto, 1997. "Noise-Proof Equilibria in Two-Action Signaling Games," Journal of Economic Theory, Elsevier, vol. 77(2), pages 432-460, December.
  12. Vickers, John, 1986. "Signalling in a Model of Monetary Policy with Incomplete Information," Oxford Economic Papers, Oxford University Press, vol. 38(3), pages 443-55, November.
  13. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  14. Avinash Dixit & Henrik Jensen, 2000. "Equilibrium Contracts for the Central Bank of a Monetary Union," CESifo Working Paper Series 400, CESifo Group Munich.
  15. Ramey, Garey, 1996. "D1 Signaling Equilibria with Multiple Signals and a Continuum of Types," Journal of Economic Theory, Elsevier, vol. 69(2), pages 508-531, May.
  16. 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.
  17. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
  18. David Backus & John Driffill, 1984. "Inflation and Reputation," Working Papers 560, Queen's University, Department of Economics.
  19. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  20. Vincent, Daniel R, 1998. "Repeated Signalling Games and Dynamic Trading Relationships," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 275-93, May.
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