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Is the Walsh Contract Really Optimal?

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  • Francisco Candel-Sánchez

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  • Juan Cristóbal Campoy-Miñarroy

Abstract

The purpose of this paper is to show that the linear penalization to inflation found in Walsh (1995) is not the government's optimal choice when the fixed part of the transfer scheme is any given constant and the payment to the central bank represents a cost for the government.

Suggested Citation

  • Francisco Candel-Sánchez & Juan Cristóbal Campoy-Miñarroy, 2004. "Is the Walsh Contract Really Optimal?," Public Choice, Springer, vol. 120(1_2), pages 29-39, July.
    • Handle: RePEc:kap:pubcho:v:120:y:2004:i:1_2:p:29-39
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    Cited by:

    1. Dai, Meixing & Spyromitros, Eleftherios, 2012. "Inflation contract, central bank transparency and model uncertainty," Economic Modelling, Elsevier, vol. 29(6), pages 2371-2381.
    2. Enrico MARCHETTI & Giuseppe CICCARONE, "undated". "Linear Contracts, Common Agency and Central Bank Preference Uncertainty," EcoMod2008 23800083, EcoMod.
    3. Georgios E. Chortareas & Stephen M. Miller, 2006. "The Walsh Contracts for Central Bankers Are Optimal After All!," Working papers 2006-14, University of Connecticut, Department of Economics.

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