Designing the Optimal Conservativeness of the Central Bank

Montserrat Ferré Carracedo and Carolina Manzano ()

Working Papers from Universitat Rovira i Virgili, Department of Economics

Abstract: In this paper we propose a new measure of the degree of conservativeness of an inde- pendent central bank and we derive the optimal value from the social welfare perspective. We show that the mere appointment of an independent central bank is not enough to achieve lower inflation, which may explain the mixed results found between central bank independence and inflation in the empirical literature. Further, the optimal central bank should not be too conservative. For instance, we will show that in some circumstances it will be optimal that the central bank is less conservative than society in the Rogoff sense. JEL classification: E58, E63. Keywords: Central bank; Conservativeness; Independence.

Keywords: Bancs centrals; 35 - Administració pública. Govern. Assumptes militars (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba and nep-mon
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http://hdl.handle.net/2072/179623

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Journal Article: Designing the optimal conservativeness of the central bank (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:urv:wpaper:2072/179623

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