This paper investigates empirically the implications of delegating monetary policy to a central bank. We argue that the theoretical literature justifying central bank independence is highly stylised and is deficient in three respects: it typically ignores nominal or real rigidities, it assumes there is only a single policy instrument under the control of a single policymaking authority and it t...

A model of a dependent central bank that internalizes the government’s budget constraint is used to examine the optimal composition of the euro zone. The model embodies the desire to stimulate output and to provide monetary financing to governments. Unable to pre-commit to first-best policies, the central bank produces excess inflation — a tendency partially reduced in a monetary union. On the ...

Inflation targeting has become an increasingly global framework, used by countries of many different types and in all the continents of the world. To assess its global contribution, this paper uses one of the broadest ever surveys of monetary policy frameworks to construct an overall picture from the individual jigsaw pieces of country frameworks. The jigsaw is made up of targets and other meas...