The Conservativeness of the Central Bank when Institutional Quality is Poor
We propose an extension of Alesina and Tabellini 's model (1987) to include corruption, which is understood as the presence of weak institutions collecting revenue through formal tax channels. This paper analyses how conservative should an independent central bank be when the institutional quality is poor. When there are no political distortions, we show that the central bank has to be more conservative than the government, except with complete corruption. In this particular case, the central bank should be as conservative as the government. Further, we obtain that the relationship between the optimal relative degree of conservativeness of the central bank and the degree of corruption is affected by supply shocks. Concretely, when these shocks are not important, the central bank should be less conservative if the degree of corruption increases. However, this result may not hold when the shocks are relevant. JEL classi fication: D6, D73, E52, E58, E62, E63. Keywords: Central Bank Conservativeness; Corruption; Fiscal Policy; Monetary Policy; Seigniorage.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 977 75 98 00
Fax: 977 75 98 10
Web page: http://www.urv.cat
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hefeker, Carsten, 2008.
"Taxation, Corruption and the Exchange Rate Regime,"
Proceedings of the German Development Economics Conference, Zurich 2008
17, Verein für Socialpolitik, Research Committee Development Economics.
- Carsten Hefeker, 2009. "Taxation, Corruption and the Exchange Rate Regime," MAGKS Papers on Economics 200911, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Hefeker, Carsten, 2008. "Taxation, corruption and the exchange rate regime," HWWI Research Papers 2-12, Hamburg Institute of International Economics (HWWI).
- Carsten Hefeker, 2009. "Taxation, Corruption and the Exchange Rate Regime," CESifo Working Paper Series 2561, CESifo Group Munich.
- Javorcik, Beata S. & Wei, Shang-Jin, 2009.
"Corruption and cross-border investment in emerging markets: Firm-level evidence,"
Journal of International Money and Finance,
Elsevier, vol. 28(4), pages 605-624, June.
- Beata S. Javorcik & Shang-Jin Wei, 2009. "Corruption and Cross-Border Investment in Emerging Markets: Firm-Level Evidence," Working Papers 062009, Hong Kong Institute for Monetary Research.
- Guy Debelle & Stanley Fischer, 1994.
"How independent should a central bank be?,"
Working Papers in Applied Economic Theory
94-05, Federal Reserve Bank of San Francisco.
- Jain, Arvind K, 2001. " Corruption: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 71-121, February.
- Huang, Haizhou & Wei, Shang-Jin, 2006.
"Monetary policies for developing countries: The role of institutional quality,"
Journal of International Economics,
Elsevier, vol. 70(1), pages 239-252, September.
- Huang, Haizhou & Wei, Shang-Jin, 2005. "Monetary Policies for Developing Countries: The Role of Institutional Quality," CEPR Discussion Papers 4911, C.E.P.R. Discussion Papers.
- Fisman, Raymond & Wei, Shang-Jin, 2001.
"Tax Rates and Tax Evasion: Evidence from 'Missing Imports' in China,"
CEPR Discussion Papers
3089, C.E.P.R. Discussion Papers.
- Raymond Fisman & Shang-Jin Wei, 2004. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 471-500, April.
- Raymond Fisman & Shang-Jin Wei, 2001. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," NBER Working Papers 8551, National Bureau of Economic Research, Inc.
- Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2001.
" Central Bank Independence: An Update of Theory and Evidence,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 15(1), pages 3-40, February.
- Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2000. "Central Bank Independence: An Update of Theory and Evidence," CEPR Discussion Papers 2353, C.E.P.R. Discussion Papers.
- Christopher Crowe & Ellen E. Meade, 2007. "The Evolution of Central Bank Governance around the World," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 69-90, Fall.
- Andreas Buehn & Friedrich Schneider, 2013.
"Shadow Economies in highly developed OECD countries: What are the driving forces?,"
Economics working papers
2013-17, Department of Economics, Johannes Kepler University Linz, Austria.
- Schneider, Friedrich & Buehn, Andreas, 2012. "Shadow Economies in Highly Developed OECD Countries: What Are the Driving Forces?," IZA Discussion Papers 6891, Institute for the Study of Labor (IZA).
- Alberto F. Alesina & Andrea Stella, 2010.
"The Politics of Monetary Policy,"
NBER Working Papers
15856, National Bureau of Economic Research, Inc.
- Ferré Carracedo, Montserrat & Manzano, Carolina, 2011.
"Designing the Optimal Conservativeness of the Central Bank,"
2072/179623, Universitat Rovira i Virgili, Department of Economics.
- Montserrat Ferre & Carolina Manzano, 2012. "Designing the optimal conservativeness of the central bank," Economics Bulletin, AccessEcon, vol. 32(2), pages 1461-1473.
- Pierre Faure, 2011.
"Public debt accumulation and institutional quality: can corruption improve welfare?,"
AccessEcon, vol. 31(1), pages 17-28.
- Pierre-Henri Faure, 2009. "Public Debt Accumulation and Institutional Quality: Can Corruption Improve Welfare?," Working Papers hal-00616572, HAL.
- Pr Ahmad Jafari Samimi & Mrs Zinat Zakeri & Asst Pr Reza Moghaddasi & Mr Khosro Azizi, . "Corruption & Fiscal Decentralization: Evidence From Some Developing Countries," Global Journal of Strategies, Governance & Applied Economics, Global Journal of Strategies, Governance & Applied Economics, vol. 3(1), pages 75-86.
When requesting a correction, please mention this item's handle: RePEc:urv:wpaper:2072/222198. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ariadna Casals)
If references are entirely missing, you can add them using this form.