A Simple Empirical Measure of Central Banks' Conservatism

In this paper we suggest a simple empirical and model-independent measure of Central Banks' Conservatism, based on the Taylor curve. This new indicator can easily be extended in time and space, whatever the underlying monetary regime of the considered countries. We demonstrate that it evolves in accordance with the monetary experiences of 32 OECD member countries from 1980, and is largely equivalent to the model-based measure provided by Krause & Mendez [Southern Economic Journal, 2005]. We finally bring forward the interest of such an indicator for further empirical analysis dealing with the preferences of Central Banks.

[1]  W. Enders,et al.  A Historical Analysis of the Taylor Curve , 2012 .

[2]  Michael Woodford,et al.  Interest and Prices , 2011 .

[3]  J. Libich.  Inflation Nutters? Modelling the Flexibility of Inflation Targeting , 2011 .

[4]  A. Mihailov,et al.  Intergenerational Transmission of Inflation Aversion: Theory and Evidence , 2009 .

[5]  F. Salsano,et al.  On the determinants of Central Bank independence in open economies , 2009 .

[6]  S. Eijffinger,et al.  The trade-off between central bank independence and conservatism in a New Keynesian framework , 2008 .

[7]  Robert E. Krainer.  Portfolio and Financing Adjustments for U.S. Banks: Some Empirical Evidence , 2008 .

[8]  Arjun Jayadev,et al.  The class content of preferences towards anti‐inflation and anti‐unemployment policies , 2008 .

[9]  S. Krause,et al.  Institutions, arrangements and preferences for inflation stability: Evidence and lessons from a panel data analysis , 2008 .

[10]  Ellen E. Meade,et al.  The Evolution of Central Bank Governance around the World , 2007 .

[11]  Diana N. Weymark.  Inflation, government transfers, and optimal central bank independence , 2007 .

[12]  Katrin Assenmacher-Wesche.  Estimating Central Banks' preferences from a time-varying empirical reaction function , 2006 .

[13]  A. Jayadev.  Differing preferences between anti-inflation and anti-unemployment policy among the rich and the poor , 2006 .

[14]  A. Scott.  INTEREST AND PRICES: FOUNDATIONS OF A THEORY OF MONETARY POLICY , 2005, Macroeconomic Dynamics.

[15]  S. Krause,et al.  Policy Makers' Preferences, Party Ideology, and the Political Business Cycle , 2005 .

[16]  Efrem Castelnuovo,et al.  What Does Monetary Policy Reveal About a Central Bank's Preferences? , 2003 .

[17]  Űmit Őzlale.  Price stability vs. output stability: tales of federal reserve administrations , 2003 .

[18]  P. Siklos.  The Changing Face of Central Banking: Evolutionary Trends since World War II , 2002 .

[19]  B. Hayo,et al.  Reconsidering central bank independence , 2002 .

[20]  Walter Enders,et al.  Using the Aggregate Demand-Aggregate Supply Model to Identify Structural Demand-Side and Supply-Side Shocks: Results Using a Bivariate VAR , 2002 .

[21]  Diana N. Weymark,et al.  Independence Before Conservatism: Transparency, Politics and Central Bank Design , 2002 .

[22]  G. Peersman,et al.  A VAR Description of the Effects of Monetary Policy in the Individual Countries of the Euro Area , 2001, SSRN Electronic Journal.

[23]  G. Peersman,et al.  A VAR Description of the Effects of Monetary Policy in the Individual Countries of the Euro Area , 2001 .

[24]  Gabriel Sterne,et al.  Inflation Targets in a Global Context , 2001 .

[25]  Paolo Surico,et al.  Model Uncertainty, Optimal Monetary Policy and the Preferences of the Fed , 2001 .

[26]  Carlo A. Favero,et al.  Macroeconomic Stability and the Preferences of the Fed: A Formal Analysis, 1961-98 , 2001 .

[27]  Helge Berger,et al.  Central Bank Independence: An Update of Theory and Evidence , 2000, SSRN Electronic Journal.

[28]  F. Lippi.  Central Bank Independence, Targets and Credibility: Political and Economic Aspects of Delegation Arrangements for Monetary Policy , 1999 .

[29]  J. Galí,et al.  Monetary Policy Rules in Practice: Some International Evidence , 1997 .

[30]  M. King.  Changes in UK monetary policy: Rules and discretion in practice , 1997 .

[31]  Lars E. O. Svensson,et al.  Open-Economy Inflation Targeting , 1997 .

[32]  Laurence Ball.  Efficient Rules for Monetary Policy , 1997 .

[33]  J. Haan,et al.  The Political Economy of Central-Bank Independence , 1996 .

[34]  David E. Spencer.  Interpreting the Cyclical Behavior of the Price Level in the U.S. , 1996 .

[35]  S. Eijffinger,et al.  The Trade Off between Central Bank Independence and Conservativeness , 1996 .

[36]  Michael K. Salemi.  Revealed Preference of the Federal Reserve: Using Inverse-Control Theory to Interpret the Policy Equation of a Vector Autoregression , 1995 .

[37]  Kenneth Rogoff,et al.  The Optimal Degree of Commitment to an Intermediate Monetary Target''Quarterly Journal of Economics , 1985 .

[38]  John B. Taylor.  ESTIMATION AND CONTROL OF A MACROECONOMIC MODEL WITH RATIONAL EXPECTATIONS , 1979 .

[39]  J. Klomp,et al.  Inflation and Central Bank Independence: A Meta-Regression Analysis , 2008 .

[40]  D. Quah,et al.  American Economic Association The Dynamic Effects of Aggregate Demand and Supply Disturbances , 2008 .

[41]  Bryan W. Roberts,et al.  The Design and Use of Political Economy Indicators , 2008 .

[42]  Till Müller.  Political determinants of central bank independence , 2008 .

[43]  Frederic S. Mishkin,et al.  American Economic Association Inflation Targeting : A New Framework for Monetary Policy ? , 2007 .

[44]  M. Tachibana.  Central Banks’ preferences in Japan, the UK, and the US , 2004 .

[45]  Satyajit Chatterjee.  The Taylor Curve and the Unemployment-Inflation Tradeoff , 2002 .

[46]  P. Siklos.  The Changing Face of Central Banking , 2002 .

[47]  E. Jondeau,et al.  Evaluating Models: A Comparison of USand , 2000 .

[48]  Lars E. O. Svensson.  Open-Economy In‡ation Targeting , 1998 .

[49]  Richard Dennis,et al.  Federal Reserve Bank of San Francisco the Policy Preferences of the U.s. Federal Reserve the Policy Preferences of the Us Federal Reserve * , 2022 .