Research Repository

Central bank independence and the monetary instrument problem

Niemann, S and Pichler, P and Sorger, G (2013) 'Central bank independence and the monetary instrument problem.' International Economic Review, 54 (3). 1031 - 1055. ISSN 0020-6598

Full text not available from this repository.

Abstract

We study the monetary instrument problem in a dynamic noncooperative game between separate, discretionary, fiscal and monetary policy makers. We show that monetary instruments are equivalent only if the policy makers' objectives are perfectly aligned; otherwise an instrument problem exists. When the central bank is benevolent while the fiscal authority is short-sighted relative to the private sector, excessive public spending and debt emerge under a money growth policy but not under an interest rate policy. Despite this property, the interest rate is not necessarily the optimal instrument. © (2013) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 04 Sep 2013 14:26
Last Modified: 17 Aug 2017 17:57
URI: http://repository.essex.ac.uk/id/eprint/7531

Actions (login required)

View Item View Item