The political economy of inflation, labour market distortions and central bank independence

Berthold Herrendorf, Manfred J M Neumann

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

Using the citizen-candidate model we study the government's choice of institutions for the labour market and the central bank and derive the implications for inflation and employment. We derive conditions for the existence of equilibria in which the labour market is distorted and the central bank is dependent or independent under a range of conditions affecting central bank dependence, the post-election cycle in inflation and employment and inflation bias. Our results imply that average inflation and inflation variability are lower under an independent central bank whereas employment variability can be lower or higher, consistent with evidence for OECD countries.

Original languageEnglish (US)
Pages (from-to)43-64
Number of pages22
JournalEconomic Journal
Volume113
Issue number484
DOIs
StatePublished - Jan 2003
Externally publishedYes

Fingerprint

Central bank
Labour market
Inflation
Central bank independence
Political economy
Inflation bias
Elections
Existence of equilibrium
Inflation variability
Government
Citizen-candidate
OECD countries

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

The political economy of inflation, labour market distortions and central bank independence. / Herrendorf, Berthold; Neumann, Manfred J M.

In: Economic Journal, Vol. 113, No. 484, 01.2003, p. 43-64.

Research output: Contribution to journalArticle

@article{32df8a3854ea4d559ceeefe28ad12cab,
title = "The political economy of inflation, labour market distortions and central bank independence",
abstract = "Using the citizen-candidate model we study the government's choice of institutions for the labour market and the central bank and derive the implications for inflation and employment. We derive conditions for the existence of equilibria in which the labour market is distorted and the central bank is dependent or independent under a range of conditions affecting central bank dependence, the post-election cycle in inflation and employment and inflation bias. Our results imply that average inflation and inflation variability are lower under an independent central bank whereas employment variability can be lower or higher, consistent with evidence for OECD countries.",
author = "Berthold Herrendorf and Neumann, {Manfred J M}",
year = "2003",
month = "1",
doi = "10.1111/1468-0297.00088",
language = "English (US)",
volume = "113",
pages = "43--64",
journal = "Economic Journal",
issn = "0013-0133",
publisher = "Wiley-Blackwell",
number = "484",

}

TY - JOUR

T1 - The political economy of inflation, labour market distortions and central bank independence

AU - Herrendorf, Berthold

AU - Neumann, Manfred J M

PY - 2003/1

Y1 - 2003/1

N2 - Using the citizen-candidate model we study the government's choice of institutions for the labour market and the central bank and derive the implications for inflation and employment. We derive conditions for the existence of equilibria in which the labour market is distorted and the central bank is dependent or independent under a range of conditions affecting central bank dependence, the post-election cycle in inflation and employment and inflation bias. Our results imply that average inflation and inflation variability are lower under an independent central bank whereas employment variability can be lower or higher, consistent with evidence for OECD countries.

AB - Using the citizen-candidate model we study the government's choice of institutions for the labour market and the central bank and derive the implications for inflation and employment. We derive conditions for the existence of equilibria in which the labour market is distorted and the central bank is dependent or independent under a range of conditions affecting central bank dependence, the post-election cycle in inflation and employment and inflation bias. Our results imply that average inflation and inflation variability are lower under an independent central bank whereas employment variability can be lower or higher, consistent with evidence for OECD countries.

UR - http://www.scopus.com/inward/record.url?scp=0037246481&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0037246481&partnerID=8YFLogxK

U2 - 10.1111/1468-0297.00088

DO - 10.1111/1468-0297.00088

M3 - Article

AN - SCOPUS:0037246481

VL - 113

SP - 43

EP - 64

JO - Economic Journal

JF - Economic Journal

SN - 0013-0133

IS - 484

ER -