Multiplicative uncertainty, central bank transparency and optimal degree of conservativeness

Dai, Meixing (2010): Multiplicative uncertainty, central bank transparency and optimal degree of conservativeness. Published in: Economics Bulletin , Vol. Vol. 3, No. no.3 (6 July 2010): pp. 1720-1726.

Abstract

This paper extends the results of Kobayashi (2003) and Ciccarone and Marchetti (2009) by considering the optimal choice of central bank conservativeness. It is shown that the government can choose a sufficiently populist but opaque central banker so that higher multiplicative uncertainty improves the social welfare only when the society is very conservative.

• Item Type: MPRA Paper
• Language: English
• Keywords: Multiplicative uncertainty; optimal degree of conservativeness; Brainard conservatism; central bank transparency.
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

References

Brainard, W.C. (1967) “Uncertainty and the effectiveness of policy” American Economic Review 57, 411–425.

Ciccarone, G. and E. Marchetti (2009) “Revisiting the role of multiplicative uncertainty in a model without inflationary bias” Economics Letters 104, 37-39.

Ciccarone, G., G. Di Bartolomeo and E. Marchetti (2007) “Unions, fiscal policy and central bank transparency” The Manchester School 75, 617-633.

Kobayashi, Teruyoshi (2003) “Multiplicative uncertainty in a model without inflationary bias” Economics Letters 80, 317–321.

Rogoff, Kenneth (1985) “The optimal degree of commitment to a monetary target” Quarterly Journal of Economics 100(4), 1169–1190.