Citation

Discussion Paper Details

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Title: Government Leadership and Central Bank Design

Author(s): Andrew Hughes Hallett and Diana Weymark

Publication Date: May 2002

Keyword(s): central bank independence, monetary policy delegation, policy coordination, policy game and policy leadership

Programme Area(s): International Macroeconomics

Abstract: This article investigates the impact on economic performance of the timing of moves in a policy game between the government and the central bank for a government with both distributional and stabilization objectives. It is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared to a regime in which monetary and fiscal policy is determined simultaneously. Further, it is shown that government leadership benefits both the fiscal and monetary authorities. The implications of these results for a country deciding whether to join a monetary union are also considered.

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Bibliographic Reference

Hughes Hallett, A and Weymark, D. 2002. 'Government Leadership and Central Bank Design'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3395