HOW CONSERVATIVE DOES THE CENTRAL BANKER HAVE TO BE? ON THE TREATMENT OF EXPECTATIONS UNDER DISCRETIONARY POLICYMAKING

Alfred Guender

Australian Economic Papers, 2009, vol. 48, issue 1, 34-49

Abstract: This paper explores an issue that arises in the delegation process. The paper shows that a myopic central banker, one who treats expectations as constant in setting discretionary policy, can replicate the behaviour of output and inflation under policy from a timeless perspective. For that to happen, society must delegate a price level target or a speed limit policy to a central banker who is more weight‐conservative than society.

Date: 2009
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https://doi.org/10.1111/j.1467-8454.2009.00362.x

Related works:
Working Paper: How Conservative Does the Central Banker Have to Be? On the Treatment of Expectations under Discretionary Policymaking (2007)
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