Precommitment by central bank independence

Manfred Neumann

Open Economies Review, 1991, vol. 2, issue 2, 95-112

Abstract: The paper addresses the issue of central bank independence. The central argument is that government can precommit to the objective of price stability by providing a constitutional status of independence to the central bank. A sufficient set of institutional elements and the problem of incentive compatibility are discussed. It is argued that the solution is superior to a constitutional money rule as no rule can take adequately into account trend changes in output or velocity. Copyright Kluwer Academic Publishers 1991

Keywords: central bank; precommitment; rules; price stability; EMU (search for similar items in EconPapers)
Date: 1991
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Citations: View citations in EconPapers (41)

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DOI: 10.1007/BF01886895

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