Fiscal Policy Restrictions on Inflation Targeting: A Political Economy Approach

Publicado en

  • Desarrollo y Sociedad

Resumen

  • Fiscal policy may impose restrictions on Inflation Targeting when Central Bank Independence (cbi) is institutionally weak and society has a real exchange rate target that is highly valued. In this environment, fiscal policy constrains the decisions of a committed, independent Central Bank (cb) regarding inflation. When such a pressure is strong enough to threaten cbi, monetary authorities react by setting an inflation target that differs from the one that would prevail in the absence of those threats. A simple model is used to illustrate this point where the cb takes into account the probability of survival as an independent institution.

fecha de publicación

  • 2010

Líneas de investigación

  • Central Bank Independence
  • Fiscal Policy Restrictions
  • Inflation Targeting

Página inicial

  • 171

Última página

  • 190

Issue

  • 65