Economics, Econometrics and Finance
4 years ago

Central bank independence not a free lunch: fiscal authority plays key role.

SSRN Electronic Journal
Central Bank Independence: A Free Lunch?
Guy Debelle

Paper Summary

Central bank independence is not the only factor affecting the economy. The fiscal authority's goals, commitment mechanisms, and policy game also impact inflation and output. The model can determine the best level of inflation aversion for the central bank.

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