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Central-Bank Independence, Economic Behavior, and Optimal Term Lengths
Christopher J. Waller and Carl E. Walsh
The American Economic Review
Vol. 86, No. 5 (Dec., 1996), pp. 1139-1153
Published by: American Economic Association
Stable URL: http://www.jstor.org/stable/2118283
Page Count: 15
You can always find the topics here!Topics: Central banking, Economic inflation, Central banks, Political partisanship, Monetary policy, Inflation rates, Central bank independence, Federal Reserve Bank, Voting, Economic fluctuations
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We parameterize central-bank independence in terms of partisanship and term length, and we focus on the implications of alternative policy structures for real economic activity. While long terms of office for the central banker can reduce the role of electoral surprises, term lengths that are too long are costly if societal preferences are subject to permanent shifts. The appointment of a conservative central banker increases the optimal term length and leads to lower average inflation but need not increase the volatility of output.
The American Economic Review © 1996 American Economic Association