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Credibility of Central Bank Independence Revisited
Author:
Mr. Timo T Valila
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Series:
IMF Working Papers
Volume/Issue:
Volume 1999: Issue 002
Language:
English
Publication Date:
01 Jan 1999
DOI:
https://doi.org/10.5089/9781451841749.001
ISBN:
9781451841749
ISSN:
1018-5941
Pages:
16
Keywords:
WP; central bank
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The specific role of central bank independence in determining the overall credibility of monetary policy is addressed in this paper. It is argued that the credibility of delegating monetary policy to an independent central bank is endogenous to the credibility of the inflation target because a “conservative” inflation target may not be compatible with the fiscal policy stance. Also, lack of transparency in designing the institutional set-up is shown to be welfare-reducing.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund