Conservative Central Banks

TY - JOUR

T1 - Conservative Central Banks

T2 - How Conservative Should a Central Bank Be?

AU - Hallett, Andrew Hughes

AU - Proske, Lorian D.

PY - 2018/2

Y1 - 2018/2

N2 - Using Rogoff's, 1985 model, we determine how inflation averse a central banker should be, given the level of volatility and projected output gap in the economy. We confirm a strong degree of conservatism, almost twice what society would have chosen. But, for a range of developing countries and the OECD, economies that systematically experience higher levels of output volatility would do best to hire a central banker who is more inflation averse than society, but less so than in stable developed economies. Thus, while a conservative central banker remains desirable, the trade‐off is with output volatility rather than with the output gap itself.

AB - Using Rogoff's, 1985 model, we determine how inflation averse a central banker should be, given the level of volatility and projected output gap in the economy. We confirm a strong degree of conservatism, almost twice what society would have chosen. But, for a range of developing countries and the OECD, economies that systematically experience higher levels of output volatility would do best to hire a central banker who is more inflation averse than society, but less so than in stable developed economies. Thus, while a conservative central banker remains desirable, the trade‐off is with output volatility rather than with the output gap itself.

UR - https://sfx-45cbs.hosted.exlibrisgroup.com/45cbs?url_ver=Z39.88-2004&url_ctx_fmt=info:ofi/fmt:kev:mtx:ctx&ctx_enc=info:ofi/enc:UTF-8&ctx_ver=Z39.88-2004&rfr_id=info:sid/sfxit.com:azlist&sfx.ignore_date_threshold=1&rft.object_id=954921359444&rft.object_portfolio_id=&svc.holdings=yes&svc.fulltext=yes

U2 - 10.1111/sjpe.12149

DO - 10.1111/sjpe.12149

M3 - Journal article

VL - 65

SP - 97

EP - 104

JO - Scottish Journal of Political Economy

JF - Scottish Journal of Political Economy

SN - 0036-9292

IS - 1

ER -