Monetary Regimes as Insurance Schemes. Old Wine in New Bottles?
Piergiovanna Natale () and
Patrizio Tirelli ()
The Manchester School of Economic & Social Studies, 1998, vol. 66, issue 5, 550-70
This paper applies the tools of insurance economics to address the trade-off between commitment and flexibility arising in monetary policy. Monetary regimes are considered as alternative insurance policies designed to stabilize output. This approach provides a simple and straightforward reinterpretation of some seminal contributions to the literature on time inconsistency--such as the desirability of monetary policy delegation to an independent conservative central banker--and it accounts for some novel results deriving from informational asymmetries about the central banker's degree of conservatism. Copyright 1998 by Blackwell Publishers Ltd and The Victoria University of Manchester
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:66:y:1998:i:5:p:550-70
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