Accountability, Transparency, and Inßation Targeting
نویسنده
چکیده
Inßation targeting regimes deÞne a performance measure for the central bank. A regime that places a large (small) weight on achieivng the target is analogous to a high (low) power incentive scheme. High powered incentive structures promote accountability but may distort stabilization policy. The optimal power under inßation targeting is derived under perfect and imperfect information. The fundamental trade off between accountability and stabilization depends on the degree of transparency, deÞned as the ability to monitor the central banks performance. Multiplicative uncertainty increases the optimal weight to place on achieving an inßation target.
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