Central bank independence and conservatism under uncertainty: Substitutes or complements?

This paper revisits the trade-off between central bank independence and conservatism using a New Keynesian model with uncertainty about the central banker's output gap target. It is shown that when this uncertainty is high, the trade-off no longer holds. In this case, the optimal combination between independence and conservatism is characterised by complementarity.

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Year of publication:	2010
Authors:	Hefeker, Carsten ; Zimmer, Blandine
Institutions:	Volkswirtschaft Abteilung, Fachbereich Wirtschaftswissenschaften
Subject:	Central bank independence \| Conservatism \| Transparency of monetary policy

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Extent:	application/pdf
Series:	MAGKS Papers on Economics.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 201001 15 pages
Classification:	E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008552469