The Tragedy of the Commons and Inflation Bias in the Euro Area
Valeriya Dinger,
Sven Steinkamp () and
Frank Westermann
No 94, IEER Working Papers from Institute of Empirical Economic Research, Osnabrueck University
Abstract:
Central bank credit has expanded dramatically in some of the euro area member countries since the beginning of the financial crisis. This paper makes two contributions to understand this stylized fact. First, we discuss a simple model of monetary policy that includes (i) a credit channel and (ii) a common pool problem in a monetary union. We illustrate that the interaction of the two elements leads to an inflation bias that is independent of the standard time-inconsistency bias. Secondly, we present empirical evidence that is consistent with the view that national central banks in the euro area have indeed followed an independent monetary policy. We show that after 2007, central bank credit has been highly correlated with unemployment, but not with inflation in the respective countries.
Keywords: Tragedy of the Commons; Inflation Bias; Credit Channel; TARGET2; Euro Area (search for similar items in EconPapers)
JEL-codes: E52 E58 H41 (search for similar items in EconPapers)
Pages: 26
Date: 2012-11-30
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
https://web.fb9.uni-osnabrueck.de/repec/iee/wpaper/13546326_WP94.pdf (application/pdf)
Related works:
Journal Article: The Tragedy of the Commons and Inflation Bias in the Euro Area (2014) 
Working Paper: The Tragedy of the Commons and Inflation Bias in the Euro Area (2012) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:iee:wpaper:wp0094
Access Statistics for this paper
More papers in IEER Working Papers from Institute of Empirical Economic Research, Osnabrueck University Rolandstrasse 8, 49069 Osnabrueck. Contact information at EDIRC.
Bibliographic data for series maintained by Karin Wessler-Rensmann ().