Credibility of Central Bank Independence Revisited
January 1, 1999
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Summary
The specific role of central bank independence in determining the overall credibility of monetary policy is addressed in this paper. It is argued that the credibility of delegating monetary policy to an independent central bank is endogenous to the credibility of the inflation target because a “conservative” inflation target may not be compatible with the fiscal policy stance. Also, lack of transparency in designing the institutional set-up is shown to be welfare-reducing.
Subject: Central bank autonomy, Fiscal policy, Inflation, Inflation targeting, Public sector
Keywords: central bank, WP
Pages:
16
Volume:
1999
DOI:
Issue:
002
Series:
Working Paper No. 1999/002
Stock No:
WPIEA0021999
ISBN:
9781451841749
ISSN:
1018-5941
