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Central Bank Independence: A Free Lunch?

Author

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  • Guy Debelle

Abstract

This paper extends the analysis of central bank independence to a model in which there is more than one policymaker. It shows that the degree of central bank independence as generally defined in the existing theoretical literature is only one of the influences on macroeconomic performance. The objectives of the fiscal authority, the commitment mechanisms available to the authorities and the nature of the policy game play a key role in determining the inflation rate and output in the economy. Furthermore, the model can be solved for the optimal degree of inflation aversion of the central bank. , a Working Paper and the authors) would welcome any comments on the present text Citations should refer to a Working Paper of the International Monetary Fund, mentioning the authors), and the date of issuance. The views expressed are those of the author(s) and do not necessarily represent those of the Fund.

Suggested Citation

  • Guy Debelle, 1996. "Central Bank Independence: A Free Lunch?," IMF Working Papers 1996/001, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1996/001
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    Citations

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    Cited by:

    1. International Monetary Fund, 1999. "United Kingdom: Selected Issues," IMF Staff Country Reports 1999/044, International Monetary Fund.
    2. Anis Chowdhury, 2002. "DOES INFLATION AFFECT ECONOMIC GROWTH? The relevance of the debate for Indonesia," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 7(1), pages 20-34.
    3. Aleksandra Maslowska, 2007. "Discussion on the Inconsistency of Central Bank Independence Measures," Discussion Papers 21, Aboa Centre for Economics.
    4. William Tompson, 1998. "The politics of central bank independence in Russia," Europe-Asia Studies, Taylor & Francis Journals, vol. 50(7), pages 1157-1182.
    5. Hossein Samiei & Mr. Jan Kees Martijn, 1999. "Central Bank Independence and the Conduct of Monetary Policy in the United Kingdom," IMF Working Papers 1999/170, International Monetary Fund.
    6. de Jong, Eelke, 2002. "Why are price stability and statutory independence of central banks negatively correlated? The role of culture," European Journal of Political Economy, Elsevier, vol. 18(4), pages 675-694, November.
    7. Marco Lossani & Piergiovanna Natale & Patrizio Tirelli, 2001. "Fiscal Policy and Inflation Targets: Does Credibility Matter?," Economia politica, Società editrice il Mulino, issue 3, pages 371-392.
    8. Mark P. Taylor & Lucio Sarno, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 839-868, September.
    9. Loungani, Prakash & Sheets, Nathan, 1997. "Central Bank Independence, Inflation, and Growth in Transition Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 381-399, August.
    10. Feldkord, Eva-Ulrike, 2005. "On the relevance of monetary aggregates in monetary policy models," HWWA Discussion Papers 317, Hamburg Institute of International Economics (HWWA).
    11. Nicoleta Bărbuță-Mișu & Tuna Can Güleç & Selim Duramaz & Florina Oana Virlanuta, 2020. "Determinants of Dollarization of Savings in the Turkish Economy," Sustainability, MDPI, vol. 12(15), pages 1-16, July.
    12. Haizhou Huang & A. Jorge Padilla, 2002. "Fiscal Policy and the Implementation of the Walsh Contract for Central Bankers," Annals of Economics and Finance, Society for AEF, vol. 3(1), pages 27-42, May.
    13. Moïse Sidiropoulos & Blandine Zimmer, 2009. "Monetary Union Enlargement, Fiscal Policy, and Strategic Wage Setting," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 631-649, August.
    14. Pierre Faure, 2003. "Monetary and Fiscal Policy Games and Effects of Institutional Differences between the European Union and the Rest of the World," Revue économique, Presses de Sciences-Po, vol. 54(5), pages 937-959.
    15. Feldkord, Eva-Ulrike, 2005. "On the Relevance of Monetary Aggregates in Monetary Policy Models," Discussion Paper Series 26343, Hamburg Institute of International Economics.
    16. Michal Jurek & Pawel Marszalek, 2015. "Policy alternatives for the relationship between ECB monetary and financial policies and new member states," Working papers wpaper112, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

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