Political consensus, uncertain preferences, and central bank independence

Muscatelli, V. A. (1998) Political consensus, uncertain preferences, and central bank independence. Oxford Economic Papers, 50(3), pp. 412-430.

Abstract

Models where monetary policy is delegated to an independent central bank using contracts or targets usually assume that the preferences of the principal and the agent are known with certainty. However, if there is no consensus in society about the relative costs of inflation and output stabilisation, the delegation solution may not produce a better outcome for the median voter than discretion This paper examines the robustness of the institutional solutions to the credibility problem with uncertain preferences We also examine the related issue of whether political parties have an interest in moving towards central bank independence.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Muscatelli, Professor Anton
• Authors: Muscatelli, V. A.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Oxford Economic Papers
• Publisher: Oxford University Press
• ISSN: 0030-7653
• ISSN (Online): 1464-3812