Median Voter Preferences, Central Bank Independence and Conservatism
This paper studies how the independence and the conservatism of a central bank relate to the structure and stability of the median voter preferences. This is done by means of a model of endogenous delegation where an opportunistic policy maker chooses the monetary regime (independence and conservatism) to maximise the welfare of the median voter. The results show that a high degree of inflation aversion of monetary policy is not necessarily associated with a high degree of central bank independence. A high and stable degree of inflation aversion of society (i.e. of the median voter) may lead to establish a dependent central bank that is highly inflation averse. This suggests that the negative correlation between inflation and central bank independence indices detected by several empirical studies may reflect a link between inflation and some deep features of social preferences. Copyright 2000 by Kluwer Academic Publishers
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Volume (Year): 105 (2000)
Issue (Month): 3-4 (December)
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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.:
- Robert J. Shiller, 1997.
"Why Do People Dislike Inflation?,"
in: Reducing Inflation: Motivation and Strategy, pages 13-70
National Bureau of Economic Research, Inc.
- Reichlin, P. & Siconolfi, P., 1998.
"Adverse Selection of Investment Projects and the Business Cycle,"
326, Banca Italia - Servizio di Studi.
- Pietro Reichlin & Paolo Siconolfi, 1998. "Adverse Selection of Investment Projects and the Business Cycle," Temi di discussione (Economic working papers) 326, Bank of Italy, Economic Research and International Relations Area.
- Reichlin, Pietro & Siconolfi, Paolo, 1997. "Adverse Selection of Investment Projects and the Business Cycle," CEPR Discussion Papers 1631, C.E.P.R. Discussion Papers.
- Hayo, Bernd, 1998. "Inflation culture, central bank independence and price stability," European Journal of Political Economy, Elsevier, vol. 14(2), pages 241-263, May.
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