Checks and Balances, Private Information, and the Credibility of Monetary Commitments

The authors develop and test several new hypotheses about the anti-inflationary effect of central bank independence and exchange rate pegs in the context of different institutions and different degrees of citizen information about government polici...

Full description

Bibliographic Details
Main Authors: Keefer, Philip, Stasavage, David
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2013
Subjects:
Online Access:http://documents.worldbank.org/curated/en/2001/02/1000495/checks-balances-private-information-credibility-monetary-commitments
http://hdl.handle.net/10986/15746
id okr-10986-15746
recordtype oai_dc
spelling okr-10986-157462021-04-23T14:03:19Z Checks and Balances, Private Information, and the Credibility of Monetary Commitments Keefer, Philip Stasavage, David CENTRAL BANK CENTRAL BANK INDEPENDENCE CENTRAL BANKS COMPETITION POLICY CPI CURRENCY BOARD DECISION MAKING DEMOCRATIC INSTITUTIONS DEVALUATION DEVELOPING COUNTRIES DISCOUNT RATE DOMESTIC INFLATION DOMESTIC PRICES ECONOMIC ASSUMPTIONS ECONOMIC CIRCUMSTANCES ECONOMIC GROWTH ECONOMIC POLICIES ECONOMICS EQUILIBRIUM EXCHANGE RATE EXCHANGE RATE PEG EXOGENOUS SHOCKS EXPORTS FINANCE MINISTRY FISCAL DEFICIT FISCAL POLICIES FISCAL POLICY FIXED EXCHANGE RATE FIXED EXCHANGE RATES FORECASTS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN INFLATION HIGH INFLATION IMPORTS INFLATION RATE INSTITUTIONAL ARRANGEMENTS INSTITUTIONAL CONTEXT INSTITUTIONAL SETTING LEGISLATION LONG TERM MACROECONOMIC POLICY MONETARY FINANCING MONETARY INSTITUTIONS MONETARY POLICIES MONETARY POLICY MONEY DEMAND MONEY MULTIPLIER MONEY SUPPLY NATIONAL INCOME NOMINAL EXCHANGE RATE NON-OECD COUNTRIES POLICY CREDIBILITY POLICY DECISIONS POLICY MAKERS POLICY OUTCOMES POLICY REFORM POLICY RESEARCH POLICY TARGETS PRICE INCREASES PRIVATE INFORMATION PRIVATE SECTOR RATE OF INFLATION REDUCING INFLATION SIGNALING STANDARD DEVIATION TERMS OF TRADE TRADEOFFS WELFARE FUNCTION CHECKS & BALANCES CENTRAL BANKS CENTRAL BANK ROLES EXCHANGE RATES GOVERNMENT POLICY PUBLIC INFORMATION CROSS COUNTRY ANALYSIS INFLATION RATES INFLATIONARY PRESSURES ECONOMIC SHOCKS The authors develop and test several new hypotheses about the anti-inflationary effect of central bank independence and exchange rate pegs in the context of different institutions and different degrees of citizen information about government policies. Theory provides strong reason to believe that while central bank independence will prove more effective as a commitment mechanism in countries where multiple players in government have veto power (checks and balances), the number of veto players will have no effect on the credibility of exchange rate pegs. Conversely, the authors argue that central bank independence does not solve the problems of commitment that arise when citizens are imperfectly informed about the contribution of government policy to inflation. Exchange rate pegs, however, mitigate these problems. The authors present extensive evidence from cross-country tests using newly developed data that provide strong support for their propositions. 2013-09-09T21:42:55Z 2013-09-09T21:42:55Z 2001-02 http://documents.worldbank.org/curated/en/2001/02/1000495/checks-balances-private-information-credibility-monetary-commitments http://hdl.handle.net/10986/15746 English en_US Policy Research Working Paper;No. 2542 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic CENTRAL BANK
CENTRAL BANK INDEPENDENCE
CENTRAL BANKS
COMPETITION POLICY
CPI
CURRENCY BOARD
DECISION MAKING
DEMOCRATIC INSTITUTIONS
DEVALUATION
DEVELOPING COUNTRIES
DISCOUNT RATE
DOMESTIC INFLATION
DOMESTIC PRICES
ECONOMIC ASSUMPTIONS
ECONOMIC CIRCUMSTANCES
ECONOMIC GROWTH
ECONOMIC POLICIES
ECONOMICS
EQUILIBRIUM
EXCHANGE RATE
EXCHANGE RATE PEG
EXOGENOUS SHOCKS
EXPORTS
FINANCE MINISTRY
FISCAL DEFICIT
FISCAL POLICIES
FISCAL POLICY
FIXED EXCHANGE RATE
FIXED EXCHANGE RATES
FORECASTS
FOREIGN CURRENCY
FOREIGN EXCHANGE
FOREIGN INFLATION
HIGH INFLATION
IMPORTS
INFLATION RATE
INSTITUTIONAL ARRANGEMENTS
INSTITUTIONAL CONTEXT
INSTITUTIONAL SETTING
LEGISLATION
LONG TERM
MACROECONOMIC POLICY
MONETARY FINANCING
MONETARY INSTITUTIONS
MONETARY POLICIES
MONETARY POLICY
MONEY DEMAND
MONEY MULTIPLIER
MONEY SUPPLY
NATIONAL INCOME
NOMINAL EXCHANGE RATE
NON-OECD COUNTRIES
POLICY CREDIBILITY
POLICY DECISIONS
POLICY MAKERS
POLICY OUTCOMES
POLICY REFORM
POLICY RESEARCH
POLICY TARGETS
PRICE INCREASES
PRIVATE INFORMATION
PRIVATE SECTOR
RATE OF INFLATION
REDUCING INFLATION
SIGNALING
STANDARD DEVIATION
TERMS OF TRADE
TRADEOFFS
WELFARE FUNCTION CHECKS & BALANCES
CENTRAL BANKS
CENTRAL BANK ROLES
EXCHANGE RATES
GOVERNMENT POLICY
PUBLIC INFORMATION
CROSS COUNTRY ANALYSIS
INFLATION RATES
INFLATIONARY PRESSURES
ECONOMIC SHOCKS
spellingShingle CENTRAL BANK
CENTRAL BANK INDEPENDENCE
CENTRAL BANKS
COMPETITION POLICY
CPI
CURRENCY BOARD
DECISION MAKING
DEMOCRATIC INSTITUTIONS
DEVALUATION
DEVELOPING COUNTRIES
DISCOUNT RATE
DOMESTIC INFLATION
DOMESTIC PRICES
ECONOMIC ASSUMPTIONS
ECONOMIC CIRCUMSTANCES
ECONOMIC GROWTH
ECONOMIC POLICIES
ECONOMICS
EQUILIBRIUM
EXCHANGE RATE
EXCHANGE RATE PEG
EXOGENOUS SHOCKS
EXPORTS
FINANCE MINISTRY
FISCAL DEFICIT
FISCAL POLICIES
FISCAL POLICY
FIXED EXCHANGE RATE
FIXED EXCHANGE RATES
FORECASTS
FOREIGN CURRENCY
FOREIGN EXCHANGE
FOREIGN INFLATION
HIGH INFLATION
IMPORTS
INFLATION RATE
INSTITUTIONAL ARRANGEMENTS
INSTITUTIONAL CONTEXT
INSTITUTIONAL SETTING
LEGISLATION
LONG TERM
MACROECONOMIC POLICY
MONETARY FINANCING
MONETARY INSTITUTIONS
MONETARY POLICIES
MONETARY POLICY
MONEY DEMAND
MONEY MULTIPLIER
MONEY SUPPLY
NATIONAL INCOME
NOMINAL EXCHANGE RATE
NON-OECD COUNTRIES
POLICY CREDIBILITY
POLICY DECISIONS
POLICY MAKERS
POLICY OUTCOMES
POLICY REFORM
POLICY RESEARCH
POLICY TARGETS
PRICE INCREASES
PRIVATE INFORMATION
PRIVATE SECTOR
RATE OF INFLATION
REDUCING INFLATION
SIGNALING
STANDARD DEVIATION
TERMS OF TRADE
TRADEOFFS
WELFARE FUNCTION CHECKS & BALANCES
CENTRAL BANKS
CENTRAL BANK ROLES
EXCHANGE RATES
GOVERNMENT POLICY
PUBLIC INFORMATION
CROSS COUNTRY ANALYSIS
INFLATION RATES
INFLATIONARY PRESSURES
ECONOMIC SHOCKS
Keefer, Philip
Stasavage, David
Checks and Balances, Private Information, and the Credibility of Monetary Commitments
relation Policy Research Working Paper;No. 2542
description The authors develop and test several new hypotheses about the anti-inflationary effect of central bank independence and exchange rate pegs in the context of different institutions and different degrees of citizen information about government policies. Theory provides strong reason to believe that while central bank independence will prove more effective as a commitment mechanism in countries where multiple players in government have veto power (checks and balances), the number of veto players will have no effect on the credibility of exchange rate pegs. Conversely, the authors argue that central bank independence does not solve the problems of commitment that arise when citizens are imperfectly informed about the contribution of government policy to inflation. Exchange rate pegs, however, mitigate these problems. The authors present extensive evidence from cross-country tests using newly developed data that provide strong support for their propositions.
format Publications & Research :: Policy Research Working Paper
author Keefer, Philip
Stasavage, David
author_facet Keefer, Philip
Stasavage, David
author_sort Keefer, Philip
title Checks and Balances, Private Information, and the Credibility of Monetary Commitments
title_short Checks and Balances, Private Information, and the Credibility of Monetary Commitments
title_full Checks and Balances, Private Information, and the Credibility of Monetary Commitments
title_fullStr Checks and Balances, Private Information, and the Credibility of Monetary Commitments
title_full_unstemmed Checks and Balances, Private Information, and the Credibility of Monetary Commitments
title_sort checks and balances, private information, and the credibility of monetary commitments
publisher World Bank, Washington, DC
publishDate 2013
url http://documents.worldbank.org/curated/en/2001/02/1000495/checks-balances-private-information-credibility-monetary-commitments
http://hdl.handle.net/10986/15746
_version_ 1764429613654605824