Can political monetary cycles be avoided?

• 成果类型: Article
• 署名作者: al-Nowaihi, A; Levine, P
• 署名单位: University of Surrey; Centre for Economic Policy Research - UK; University of Surrey; University of Leicester
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(98)00032-4
• 发表日期: 1998
• 页码: 525-545
• 关键词: credibility; central bank contract; reputation; RENEGOTIATION

摘要

This paper shows that political monetary cycles can be avoided in a monetary regime with Walsh-type contracts. Such contracts were originally proposed to eliminate the inflationary bias of discretionary monetary policy. This requires some commitment mechanism to enforce the contract and prevent its renegotiation, but here we rule this out. Instead, in the context of a monetary regime with an instrument-independent central bank and an inflation target (the goal) set by the government, Walsh contracts serve a different purpose: namely, they provide an efficient signalling device that eliminates the political monetary cycle, results in the election of competent governments and increases social welfare. (C) 1998 Elsevier Science B.V. All rights reserved.