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| Tekijä: | Prast, H. |
| Otsikko: | Commitment rather than independence: An institutional design for reducing the inflationary bias of monetary policy |
| Lehti: | Kyklos
1996 : VOL. 49:3, p. 377-405 |
| Asiasana: | MONETARY POLICY CENTRAL BANKS INFLATION |
| Kieli: | eng |
| Tiivistelmä: | This paper distinguishes between central bank independence and central bank commitment. Independent central banks are free to choose their policy goals and instruments, whereas committed central banks are limited in their behaviour in line with the prescribed goal of price stability. It is argued here that for political and economic reasons commitment is to be preferred over independence. For a set of 16 industrial countries the central banks are ranked according to their degree of true central bank independence as well as to their degree of commitment. The empirical evidence does not indicate a significant relationship between true overall independence, whereas a simple commitment strategy, which does not require major institutional changes, is shown to lower inflation without affecting output. |
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