Working Paper: CEPR ID: DP761
Authors: Juan J. Dolado; Mark Griffiths; A. Jorge Padilla
Abstract: In this paper we show that the delegation of monetary policy to an independent and more conservative central banker is an optimal policy in an international context with monetary spillovers between countries, even in the absence of time inconsistency (credibility) issues. We also study the welfare implications of delegating monetary policy and extend our analysis to incorporate the coordination of monetary policies.
Keywords: monetary policy; international economy; delegation; spillovers
JEL Codes: E52; E58; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Governments (H10) | conservative central bankers (E58) |
| conservative central bankers (E58) | lower money growth rates (E49) |
| delegation (M54) | lower money growth rates (E49) |
| positive monetary spillovers (F69) | strategic substitutes in money growth rates (E49) |
| one country increases money growth rate (O42) | reduction in its own money growth rate (E49) |
| delegation (M54) | intrinsic deflationary bias exacerbation (E31) |
| negative monetary spillovers (F69) | welfare improvement through delegation (I38) |