Working Paper: CEPR ID: DP3278
Authors: Ilian Mihov; Anne Sibert
Abstract: We consider independent monetary policy committees as a simple way of attaining relatively low inflation without completely sacrificing the stabilization role of monetary policy. If central banker's types are unknown, then for a wide range of parameters an independent monetary policy committee is better than either a mandated zero-inflation rule or discretionary policy conducted by an opportunistic central banker.
Keywords: inflationary bias; monetary policy committee; output stabilization; reputation
JEL Codes: E42; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| independent monetary policy committees (E58) | lower inflation (E31) |
| independent monetary policy committees (E58) | stabilization in response to shocks (E63) |
| size of economic shocks (F41) | committee's inflation response (E31) |
| variance of shocks (C22) | expected social welfare loss (D69) |
| independent monetary policy committees (E58) | lower inflation bias (E31) |
| independent monetary policy committees (E58) | higher expected social welfare (D69) |