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Central-Bank Independence, Economic Behavior, and Optimal Term Lengths: Comment

Author

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  • Lin, Xiang

    (Dept. of Economics, Stockholm University)

Abstract

Waller and Walsh (1996) argue that the optimal length of the central banker can exceed one period when the central bank is conservative enough. However, the optimal conservativeness is unlikely to be exogenous. In this note we show how the optimal conservativeness and the optimal term length are determined simultaneously in the framework of Waller and Walsh. Furthermore, we extend the study to the inflation contract and the inflation target regimes. Under both regimes, the optimal parameter of the conservativeness is independet of the term length and is always 1. Moreover, it is possible of have an optimal multi-term central banker under both the state-contingent inflation contract regime and the state-contingent inflation target regime.

Suggested Citation

  • Lin, Xiang, 1998. "Central-Bank Independence, Economic Behavior, and Optimal Term Lengths: Comment," Research Papers in Economics 1997:11, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:1997_0011
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    File URL: http://www2.ne.su.se/paper/wp97_11.pdf
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    References listed on IDEAS

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    1. Svensson, Lars E O, 1997. "Optimal Inflation Targets, "Conservative" Central Banks, and Linear Inflation Contracts," American Economic Review, American Economic Association, vol. 87(1), pages 98-114, March.
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    More about this item

    Keywords

    central bank independence; inflation target; optimal term length;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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