Optimal Term Length for an Overconfident Central Banker

Etienne Farvaque and Norimichi Matsueda

No 106, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: This paper discusses the implications of overconfidence when it affects a monetary policy-maker. We consider two forms of overconfidence: the illusion of precision and the illusion of control. Embedding them in a standard New Keynesian framework, we derive the optimal term length of a central banker and examine how it depends on the types and degrees of overconfidence. In particular, we show that the legal mandate should be lengthened when these two types of biases increase concurrently.

Keywords: central banker; overcon dence; legal mandate; optimal term length (search for similar items in EconPapers)
JEL-codes: E58 H11 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2013-06, Revised 2013-06
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://192.218.163.163/RePEc/pdf/kgdp106.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: OPTIMAL TERM LENGTH FOR AN OVERCONFIDENT CENTRAL BANKER (2017)
Working Paper: Optimal term length for an overconfident central banker (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:106

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