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Rogoff´s "conservative" central banker restored

Record type: Article

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.

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Citation

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

More information

Published date: November 1997

Identifiers

Local EPrints ID: 33452
URI: http://eprints.soton.ac.uk/id/eprint/33452
ISSN: 0022-2879
PURE UUID: 7b6ad47b-d4ee-4262-b128-ec1ba4430617

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Date deposited: 14 Dec 2007
Last modified: 17 Jul 2017 15:52

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Contributors

Author: Berthold Herrendorf
Author: Ben Lockwood

University divisions


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