Optimal inflation contracts and inflation targets with uncertain central bank preferences: Accountability through independence?

Muscatelli, A. (1998) Optimal inflation contracts and inflation targets with uncertain central bank preferences: Accountability through independence? Economic Journal, 108(447), pp. 529-542. (doi: 10.1111/1468-0297.00302)

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Publisher's URL: http://dx.doi.org/10.1111/1468-0297.00302

Abstract

This paper examines some problems which arise when monetary policy is delegated to an independent central bank and where the central bank's preferences are unknown. Two key conclusions emerge from the paper. First, even with optimal targets or contracts, central bank independence may not always be desirable because central banks may have distorted preferences relative to society. Second, if the delegation solution is preferable, and the independent central bank responds to information about supply shocks, the central bank may be made more accountable by allowing it to set its own inflation targets, i.e. by making it goal-independent

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Muscatelli, Professor Anton
Authors: Muscatelli, A.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Economic Journal
Publisher:Blackwell
ISSN:0013-0133
ISSN (Online):1468-0297

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