Rogoff´s "conservative" central banker restored

Herrendorf, Berthold and Lockwood, Ben (1997) Rogoff´s "conservative" central banker restored. Journal of Money, Credit, and Banking, 4, (1), 476-495.


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We show that delegation of monetary policy to a weight-conservative central banker can be desirable, although the government can also use an inflation contract, an employment target, an inflation target, or any combination of these to control the central banker. The key feature of our model is a stochastic inflation bias, arising when wage setters receive some information about a supply shock prior to signing nominal wage contracts. Weight-conservatism is found to be desirable if fully state-contingent delegation is not possible and the stochastic inflation bias cannot be eliminated by optimal choice of the delegation parameters.

Item Type: Article
ISSNs: 0022-2879 (print)
Related URLs:
Subjects: H Social Sciences > HB Economic Theory
Divisions : University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 33452
Accepted Date and Publication Date:
November 1997Published
Date Deposited: 14 Dec 2007
Last Modified: 27 Mar 2014 18:20

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