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Fiscal disciplining effect of central bank opacity: Stackelberg versus Nash equilibrium

Author

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  • Dai, Meixing
  • Sidiropoulos, Moïse

Abstract

In a Stackelberg equilibrium, central bank opacity has a fiscal disciplining effect in the sense that it induces the government to reduce taxes and public expenditures, leading hence to lower inflation and output distortions. This effect could disappear or be dominated by the direct effect of opacity when the fiscal and monetary authorities play a Nash game.

Suggested Citation

  • Dai, Meixing & Sidiropoulos, Moïse, 2011. "Fiscal disciplining effect of central bank opacity: Stackelberg versus Nash equilibrium," MPRA Paper 29843, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:29843
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    File URL: https://mpra.ub.uni-muenchen.de/29843/1/MPRA_paper_29843.pdf
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    References listed on IDEAS

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    1. Demertzis, Maria & Hughes Hallett, Andrew, 2007. "Central Bank transparency in theory and practice," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 760-789, December.
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    11. Giuseppe Ciccarone & Enrico Marchetti & Giovanni Di Bartolomeo, 2007. "Unions, Fiscal Policy And Central Bank Transparency," Manchester School, University of Manchester, vol. 75(5), pages 617-633, September.
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    14. Dai, Meixing & Sidiropoulos, Moïse, 2011. "Monetary and fiscal policy interactions with central bank transparency and public investment," Research in Economics, Elsevier, vol. 65(3), pages 195-208, September.
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    Cited by:

    1. Oros, Cornel & Zimmer, Blandine, 2015. "Uncertainty and fiscal policy in a monetary union: Why does monetary policy transmission matter?," Economic Modelling, Elsevier, vol. 50(C), pages 85-93.
    2. Meixing Dai & Moïse Sidiropoulos & Eleftherios Spyromitros, 2015. "Fiscal Policy, Institutional Quality and Central Bank Transparency," Manchester School, University of Manchester, vol. 83(5), pages 523-545, September.

    More about this item

    Keywords

    Distortionary taxes; output distortions; central bank transparency (opacity); fiscal disciplining effect.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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