Fiscal disciplining effect of central bank opacity: Stackelberg versus Nash equilibrium

Meixing Dai () and Moise Sidiropoulos

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: Several recent studies have shown that, when fiscal and monetary authorities play a Stackelberg game, central bank opacity has a fiscal disciplining effect in the sense that it induces the government to reduce taxes and public expenditures, leading hence to lower inflation and output distortions, and lower macroeconomic variability. We show in this paper that, in a Nash equilibrium, the government is still disciplined by central bank opacity. However, the disciplining effect on the level and variability of inflation and the output gap is dominated by the direct effect of opacity.

Keywords: Distortionary taxes; output distortions; central bank transparency (opacity); fiscal disciplining effect. (search for similar items in EconPapers)
JEL-codes: E52 E58 E62 E63 H30 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Fiscal disciplining effect of central bank opacity: Stackelberg versus Nash equilibrium (2011)
Working Paper: Fiscal disciplining effect of central bank opacity: Stackelberg versus Nash equilibrium (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2011-17

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