When should central bankers be fired?
In recent years, a number of countries have changed their central banking institutions. Often these reforms involve granting long terms of office to central bankers. This threatens to limit the extent to which the central bank can be held accountability. Dismissal rules can help ensure accountability, and, in the presence of inflation shocks, the socially optimal commitment policy is supported by a dismissal rule similar to a modified nominal income rule. The government's promise to follow the rule is shown to be credible in a trigger strategy equilibrium for reasonable parameter values. Copyright Springer-Verlag Berlin Heidelberg 2002
Volume (Year): 3 (2002)
Issue (Month): 1 (03)
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