Inflation Forecast Contracts

Research, Preprint OPEN
Gersbach, Hans; Hahn, Volker;
  • Publisher: Zurich: ETH Zurich, CER-ETH - Center of Economic Research
  • Related identifiers: doi: 10.3929/ethz-a-006562013
  • Subject: central banks; incentive contracts; inflation forecast targeting; inflation targeting; intermediate targets; transparency | Leistungsanreiz | central banks | incentive contracts | E58 | Politische Kommunikation | Central banks; Transparency; WIRTSCHAFTSPROGNOSEN; WIRTSCHAFTSPOLITISCHE INSTRUMENTE UND MASSNAHMEN; Incentive contracts; NATIONAL BANKS + CENTRAL BANKS; Intermediate targets; ECONOMIC MEASURES AND INSTRUMENTS; Inflation forecast targeting; INFLATION; Inflation targeting; ECONOMIC FORECASTS; NATIONALBANKEN + ZENTRALBANKEN | central banks, incentive contracts, transparency, inflation targeting, inflation forecast targeting, intermediate targets | Inflationserwartung | inflation forecast targeting | Economics | Experten | transparency | intermediate targets | inflation targeting | Inflationssteuerung | Theorie
    • jel: jel:E58
      ddc: ddc:330
    arxiv: General Relativity and Quantum Cosmology | Astrophysics::Cosmology and Extragalactic Astrophysics | Physics::Atmospheric and Oceanic Physics

We introduce a new type of incentive contract for central bankers: inflation forecast contracts, which make central bankers’ remunerations contingent on the precision of their inflation forecasts. We show that such contracts enable central bankers to influence inflation... View more
  • References (45)
    45 references, page 1 of 5

    David Backus and John Driffill. The Consistency of Optimal Policy in Stochastic Rational Expectations Models. CEPR Discussion Papers 124, August 1986.

    Roel M. W. J. Beetsma and Henrik Jensen. Inflation Targets and Contracts with Uncertain Central Banker Preferences. Journal of Money, Credit, and Banking, 30 (3):384-403, August 1998.

    Roel M. W. J. Beetsma and Henrik Jensen. Optimal Inflation Targets, ”Conservative” Central Banks, and Linear Inflation Contracts: Comment. The American Economic Review, 89(1):342-348, March 1999.

    Ben S. Bernanke, Thomas Laubach, Frederic S. Mishkin, and Adam S. Posen. Inflation Targeting. Princeton University Press, Princeton, New Jersey, 1999.

    Stephen G. Cecchetti and Stefan Krause. Central Bank Structure, Policy Efficiency, and Macroeconomic Performance: Exploring Empirical Relationships. Federal Reserve Bank of St. Louis Review, July/August 2002.

    V. V. Chari, Patrick J. Kehoe, and Ellen R. McGrattan. Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem? Econometrica, 68(5):1151-1179, September 2000.

    Richard Clarida, Jordi Gal´ı, and Mark Gertler. The Science of Monetary Policy: A New Keynesian Perspective. Journal of Economic Literature, 37(4):1661-1707, December 1999.

    Richard Clarida, Jordi Gal´ı, and Mark Gertler. Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory. Quarterly Journal of Economics, 115 (1):147-180, 2000.

    Sylvester C.W. Eijffinger and Petra M. Geraats. How Transparent are Central Banks? European Journal of Political Economy, 22(1):1-21, March 2006.

    Hans Gersbach and Volker Hahn. Monetary Policy Inclinations. Journal of Money, Credit, and Banking, 2011. forthcoming.

  • Metrics
Share - Bookmark