Rogoff's 'Conservative' Central Banker Restored

Berthold Herrendorf and Ben Lockwood

No 1386, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper shows that delegation of monetary policy to a weight-conservative central banker is optimal, although the government can also use an inflation contract, an employment target, an inflation target, or any combination of these, to control the central banker. The key feature of our model is a stochastic inflation bias, arising when wage-setters receive some information about a supply shock prior to signing nominal wage contracts. Weight-conservatism is shown to be desirable if the stochastic inflation bias cannot be eliminated by optimal choice of the delegation parameters.

Keywords: Conservative Central Banker; Delegation; Incomplete Information (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 1996-04
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Citations: View citations in EconPapers (23)

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Related works:
Journal Article: Rogoff's "Conservative" Central Banker Restored (1997)
Working Paper: ROGOFF'S 'CONSERVATIVE' CENTRAL BANKER RESTORED (1996)
Working Paper: Rogoff's Conservative Central Banker Restored (1996)
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