SUPPLY-SIDE FISCAL POLICY, CONSERVATIVENESS, AND CENTRAL BANK TRANSPARENCY

Giuseppe Ciccarone, Giovanni Di Bartolomeo () and Enrico Marchetti ()

No 77, Working Papers from Sapienza University of Rome, Department of Public Economics

Abstract: This paper focuses on the “contingent” view of transparency. By introducing endogenous fiscal policy and labour market distortions, it studies the effects the uncertainty in central bank’s (CB) preferences on the behaviour of wage and fiscal authorities and thus on output and inflation. We consider the problem on both positive and normative perspectives. First, we investigate the effects of a given degree of uncertainty in CB’s preferences on inflation and real output. Second, in line with recent literature, by assuming the possibility that information on CB’s preferences may be an endogenous variable, we study the optimal degree of transparency from the CB’s viewpoint. Although a general analysis is presented, we focus on the case of a small-bounded variance of CB’s preference, i.e. we assume that the CB’s power of affecting information disclosure and influencing private beliefs is limited.

Keywords: Central bank transparency; Communication; Inflation uncertainty. (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
Date: 2005-02
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Persistent link: http://EconPapers.repec.org/RePEc:sap:wpaper:77

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