Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71108
Authors: 
Berlemann, Michael
Hielscher, Kai
Year of Publication: 
2011
Series/Report no.: 
Diskussionspapier, Helmut-Schmidt-Universität, Fächergruppe Volkswirtschaftslehre 112
Abstract: 
Based on an extended version of a time-inconsistency model of monetary policy we show that the degree of effective monetary policy conservatism can be uncovered by studying to what extent central banks react to real disturbances. By estimating central bank reaction functions in moving and overlapping intervals for the period of 1985 to 2007 using an ordered logit approach in a panel setting we derive a time-varying indicator of effective monetary policy conservatism for Canada, Sweden, the UK and the US. Employing this indicator we show that increasing effective conservatism tends to lower inflation without increasing the output gap. However, while a higher degree of effective conservatism does not result in lower inflation uncertainty the variance of the output gap tends to decrease.
Subjects: 
central banking
monetary policy
conservatism
central bank independence
inflation
JEL: 
E31
E58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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