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Central Bank Design in General Equilibrium

James Bullard and Christopher J. Waller
Journal of Money, Credit and Banking
Vol. 36, No. 1 (Feb., 2004), pp. 95-113
Stable URL: http://www.jstor.org/stable/3839049
Page Count: 19
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Central Bank Design in General Equilibrium
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Abstract

We study the effects of alternative institutional arrangements for the determination of monetary policy in the context of a capital-theoretic, general equilibrium economy. We consider three institutional arrangements for determining monetary policy. The first, unconditional majority voting, always leads to a substantial inflation bias. The second, a simple form of bargaining which we interpret as a policy board, generally improves on the unconditional majority voting outcome. Finally, we consider a constitutional rule which always achieves the social optimum.

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