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Modern Approaches to Central Banking

Listed author(s):
  • Stanley Fischer
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    Modern theory has delivered both the conservative central banker and the principal-agent approaches as rationales for the independence of the central bank. The principal-agent approach directs attention to the importance of both clearly defining the goals of the central bank and its command in order to meet the targets assigned to it. The empirical evidence shows not only that greater independence is associated with lower inflation, but also that the central bank's rights not to finance the government and to set interest rates independently increase its effectiveness. The role of inflation targeting and the distinction between price level and inflation targeting are also analyzed.

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    File URL: http://www.nber.org/papers/w5064.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5064.

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    Date of creation: Mar 1995
    Handle: RePEc:nbr:nberwo:5064
    Note: ME
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