Median Voter Preferences, Central Bank Independence and Conservatism |
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Contents
This paper studies how the independence and conservatism of a central bank relate | 7 |
The optimal degree of conservatism and independence | 16 |
Conclusions | 22 |
Common terms and phrases
A. F. POZZOLO adjust policy targets appears from equation attitudes towards inflation average inflation target aversion of monetary aversion of policy aversion to inflation Banca d'Italia BoČ Bundesbank's central bank independence central bank inflation central bank policy conservatism and independence correlation degree of central degree of conservatism degree of independence degree of inflation delegation arrangement desired and natural discretionary policy effective degree empirical equations 11 Ex-post losses expected value flexibility to adjust full independence gap between desired Hayo high degree implies independence and conservatism inflation and output inflation-aversion inflationary bias problem instability Lippi loss function losses under discretion low inflation median voter preferences monetary policy delegation monetary regime natural output optimal degree order condition output target output weight paper policy is implemented random variable reaction function regime parameters retains more flexibility supply shock temptation to inflate values of inflation Waller and Walsh βθχ πο