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La Autonomía del Banco Central una Vez Más

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Author Info
Francisco Rosende () (Instituto de Economía. Pontificia Universidad Católica de Chile.)
Abstract

This paper reviews recent developments on central banking. The first part discusses the "institutions irrelevance hypothesis" raised by Posen, among other economists. According to this view, the central bank independence (CBI) effectiveness as an arrangement for achieving a low inflation rate depends heavily upon the political weight of those groups whose welfare is harmed by inflation. Another important issue is the discussion on real effects of a CBI scheme. According to some evidence, the sacrifice ratio rises under that institutional framework. This result strikes the hypothesis that a credibility bonus comes up with the above-mentioned scheme. Alternative explanations are evaluated. In the second part of the paper the inflation contract scheme is analyzed. This scheme achieved popularity after the succesful disinflation strategy implemented in New Zealand during the first half of the 90s. An explicit inflation goal was implemented through a contract between the minister of finance and the president of the central bank. According to the contract, the central bank's head wage depends on the achievement of the inflation target. We discuss the problems raised by this scheme, considering the incentives that it creates on monetary policy. An evaluation of recent developments on monetary institutions is finally provided

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Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.

Volume (Year): 34 (1997)
Issue (Month): 101 ()
Pages: 3-26
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Handle: RePEc:ioe:cuadec:v:34:y:1997:i:101:p:3-26

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  4. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February. [Downloadable!] (restricted)
  5. William Easterly, 1992. "How Much does Policy Affect Growth?," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(87), pages 295-306. [Downloadable!]
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  9. Pierce, James L., 1978. "The myth of congressional supervision of monetary policy," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 363-370, April. [Downloadable!] (restricted)
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  13. Alesina, Alberto & Cohen, Gerald D. & Roubini, Nouriel, 1993. "Electoral business cycle in industrial democracies," European Journal of Political Economy, Elsevier, vol. 9(1), pages 1-23, March. [Downloadable!] (restricted)
  14. Carl E. Walsh, 1995. "Recent Central-Bank Reforms and the Role of Price Stability as the Sole Objective of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 237-252 National Bureau of Economic Research, Inc. [Downloadable!]
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  16. Mas, Ignacio, 1995. "Central bank independence: A critical view from a developing country perspective," World Development, Elsevier, vol. 23(10), pages 1639-1652, October. [Downloadable!] (restricted)
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  19. Walsh, Carl E, 1995. "Is New Zealand's Reserve Bank Act of 1989 an Optimal Central Bank Contract?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1179-91, November. [Downloadable!] (restricted)
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  20. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June. [Downloadable!] (restricted)
  21. Adam S. Posen, 1995. "Declarations Are Not Enough: Financial Sector Sources of Central Bank Independence," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 253-274 National Bureau of Economic Research, Inc. [Downloadable!]
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