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The trade off between central bank independence and conservativeness

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  • Eijffinger, S.C.W.

    (Tilburg University, School of Economics and Management)

  • Hoeberichts, M.M.

    (Tilburg University, School of Economics and Management)

Abstract

This paper introduces a parameter for central bank independence in a monetary policy game with a conservative central banker. It tries to explain the optimal degree of central bank independence and conservativeness by four economic and political determinants, both theoretically and empirically. There appears to be a trade-off between central bank independence and conservativeness. Then, by comparing the optimal degree of conservativeness and independence with the actual degree of independence, the authors want to identify the optimal degree of conservativeness for twelve member states of the European Union. Copyright 1998 by Royal Economic Society.
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Suggested Citation

  • Eijffinger, S.C.W. & Hoeberichts, M.M., 1998. "The trade off between central bank independence and conservativeness," Other publications TiSEM edcd13f6-471a-415a-b14e-5, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:edcd13f6-471a-415a-b14e-5ccf48c5c4e7
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    1. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-286, March.
    2. Eijffinger, S.C.W. & Schaling, E., 1993. "Central bank independence in twelve industrial countries," Other publications TiSEM a8720614-d5b9-4252-9afe-9, Tilburg University, School of Economics and Management.
    3. Eijffinger, S.C.W. & Schaling, E., 1993. "Central bank independence : Theory and evidence (Revised version)," Other publications TiSEM a26d2af2-01f7-4f0f-b2e9-3, Tilburg University, School of Economics and Management.
    4. Eijffinger, S.C.W. & Schaling, E., 1992. "Central bank independence : Criteria and indices," Other publications TiSEM 739426b2-dc3c-40b2-ae90-8, Tilburg University, School of Economics and Management.
    5. Eijffinger, S.C.W. & de Haan, J., 1995. "The political economy of central bank independence (Second, revised version)," Other publications TiSEM faea69c8-d2b1-40bb-9029-2, Tilburg University, School of Economics and Management.
    6. Manfred Neumann, 1991. "Precommitment by central bank independence," Open Economies Review, Springer, vol. 2(2), pages 95-112, June.
    7. Eijffinger, S.C.W. & de Haan, J., 1995. "The political economy of central bank independence (Second, revised version)," Other publications TiSEM faea69c8-d2b1-40bb-9029-2, Tilburg University, School of Economics and Management.
    8. Alex Cukierman, 1992. "Central Bank Strategy, Credibility, and Independence: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031981, December.
    9. Eijffinger, S.C.W. & Schaling, E., 1993. "Central bank independence : Theory and evidence (Revised version)," Other publications TiSEM a26d2af2-01f7-4f0f-b2e9-3, Tilburg University, School of Economics and Management.
    10. Eric Schaling, 1995. "Institutions and Monetary Policy," Books, Edward Elgar Publishing, number 547.
    11. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    12. Eijffinger, S.C.W., 1993. "Central bank independence in twelve industrial countries," Other publications TiSEM 0401b17a-e2c7-4179-ace9-a, Tilburg University, School of Economics and Management.
    13. Cukierman Alex, 1992. "CENTRAL BANK STRATEGY, CREDIBILITY, AND INDEPENDANCE: THEORY AND EVIDENCE: Compte Rendu par Dominique Cariofillo," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 581-590, December.
    14. Eijffinger, S.C.W. & Hoeberichts, M.M. & Schaling, E., 1995. "Optimal conservativeness in the Rogoff (1985) model : A graphical and closed-form solution," Discussion Paper 1995-121, Tilburg University, Center for Economic Research.
    15. de Haan, Jakob & van 't Hag, Gert Jan, 1995. "Variation in Central Bank Independence across Countries: Some Provisional Empirical Evidence," Public Choice, Springer, vol. 85(3-4), pages 335-351, December.
    16. Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
    17. Eijffinger, S.C.W. & Schaling, E., 1992. "Central bank independence : Criteria and indices," Other publications TiSEM 739426b2-dc3c-40b2-ae90-8, Tilburg University, School of Economics and Management.
    18. Haizhou Huang & Michele Fratianni, 1995. "Central Bank Reputation and Conservativeness," FMG Discussion Papers dp216, Financial Markets Group.
    19. Aigner, Dennis J. & Hsiao, Cheng & Kapteyn, Arie & Wansbeek, Tom, 1984. "Latent variable models in econometrics," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 23, pages 1321-1393, Elsevier.
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