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Credibility and Flexibility with Monetary Policy Committees

  • Ilian Mihov


  • Anne Sibert

    (Birkbeck College, University of London

We consider independent monetary policy committees as a simple way of attaining relatively low inflation without completely sacrificing an activist role of monetary policy. If central banker¡¦s types are unknown, then for a wide range of parameters an independent monetary policy committee is better than either a mandated zero-inflation rule or discretionary policy conducted by an opportunistic central banker.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 232002.

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Length: 25 pages
Date of creation: Dec 2002
Date of revision:
Handle: RePEc:hkm:wpaper:232002
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  1. Sibert, Anne, 1999. "Monetary Policy Committees: Individual and Collective Reputations," CEPR Discussion Papers 2328, C.E.P.R. Discussion Papers.
  2. 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.
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  8. 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.
  9. Anne Sibert, 2003. "Monetary Policy Committees: Individual and Collective Reputations," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 649-665.
  10. Faust, Jon, 1996. "Whom can we trust to run the Fed? Theoretical support for the founders' views," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 267-283, April.
  11. Gerling, Kerstin & Gruner, Hans Peter & Kiel, Alexandra & Schulte, Elisabeth, 2005. "Information acquisition and decision making in committees: A survey," European Journal of Political Economy, Elsevier, vol. 21(3), pages 563-597, September.
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  13. Sibert, Anne, 2002. "Monetary policy with uncertain central bank preferences," European Economic Review, Elsevier, vol. 46(6), pages 1093-1109, June.
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  16. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
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  19. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  20. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
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  23. Waller, Christopher J., 1992. "A bargaining model of partisan appointments to the central bank," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 411-428, June.
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  25. Clive Briault & Andrew Haldane & Mervyn King, 1996. "Independence and Accountability," Bank of England working papers 49, Bank of England.
  26. Bullard, James & Waller, Christopher J, 2004. "Central Bank Design in General Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 95-113, February.
  27. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
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