Abstract
The time inconsistency of optimal policy plans is today’s most popular theoretical explanation for the existence of positive inflation rates. Among academics, incentive mechanisms for central bankers are becoming a very popular solution concept for this particular problem. The appealing feature of incentive mechanisms is that they solve the credibility problem of the central bank without reducing monetary policy flexibility. Gerhard Illing has provided an insightful survey of this recent literature. And he raises a couple of interesting questions for further research. In my comment I want to make some additional skeptical remarks.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Akerlof, G., W. T. Dickens and G. L. Perry (1996), The Macroeconomics of Low Inflation, Brookings Papers on Economic Activity, 1, 1–59.
Alesina, A. and L. Summers (1993), Central Bank Independence and Macroconomic Performance: Some Comparative Evidence, Journal of Money, Credit, and Banking 25, 157–62.
Blinder, A. S (1997), What Central Bankers Could Learn from Academics — and Vice Versa, Journal of Economic Perspectives 11, 3–19.
Cukierman, A. (1992), Central Bank Strategy, Credibility and Independence: Theory and Evidence, Cambridge, MA.
Caillaud B., D. Cohen and R. Jullien (1994), Towards a Theory of Self Restraint, CEPREMAP Discussion Paper No. 9421, Paris.
Fratianni, M., J. von Hagen and C. Waller (1997), Central-Banking as a Political Principal-Agent Problem, Economic Inquiry 35, 378–93.
Grilli, V., D. Masciandaro and G. Tabellini (1991), Political and Monetary Institutions and Public Financial Policies in Industrialized Countries, Economic Policy 13, 341–92.
Grüner, H. P. (1997), A Comparison of Three Institutions for Monetary Policy when Central Bankers have Private Objectives, Public Choice 62, 172–93.
Grüner, H. P. and C. Hefeker (1995), Domestic Pressures and the Exchange Rate Regime: why Economically Bad Decisions are Politically Popular, Banca Nazionale del Lavoro Quarterly Review 194, 331–50.
Hellwig, M. (1976), A Model of Monetary Exchange, Econometric Research Programme Research Memorandum No. 202, Princeton University, Princeton NJ.
Hellwig, M. (1993), The Challenge of Monetary Theory, European Economic Review 31, 215–43.
Herrendorf, B. and M. J. M. Neumann (1997), A Positive Theory of Central Bank Independence, University of Bonn.
Kiyotaki, N. and R. Wright (1989), On Money as a Medium of Exchange, Journal of Political Economy 97, 927–54.
Lucas R. E. (1997), The Welfare Costs of Inflation, Presidential Address, Econometric Society North American Meeting, Pasadena, CA.
Siebke, J. and J. Thieme (1981), Einkommen, Beschäftigung, Preisniveau, Vahlens Kompendium der Wirtschaftstheorie und Wirtschaftspolitik, Verlag Vahlen, München.
Walsh, C. E. (1995), Is New Zealand’s Reserve Bank Act of 1989 an Optimal Central Bank Contract?, Journal of Money, Credit, and Banking 27, 1178–91.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1998 Physica-Verlag Heidelberg
About this paper
Cite this paper
Grüner, HP. (1998). Comment. In: Wagner, H. (eds) Current Issues in Monetary Economics. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-99797-6_4
Download citation
DOI: https://doi.org/10.1007/978-3-642-99797-6_4
Publisher Name: Physica-Verlag HD
Print ISBN: 978-3-7908-1127-8
Online ISBN: 978-3-642-99797-6
eBook Packages: Springer Book Archive