Fiscal Leadership and Central Bank Design

21 Pages Posted: 19 May 2007

See all articles by Andrew J. Hughes

Andrew J. Hughes

Cardiff Business School; Centre for Economic Policy Research (CEPR); Vanderbilt University - College of Arts and Science - Department of Economics

Diana N. Weymark

Vanderbilt University - College of Arts and Science - Department of Economics; Western Washington University

Abstract

This article investigates the impact, on economic performance, of the timing of moves in a policy game between the government and the central bank for a government that has both redistributional and stabilization objectives. It is shown that both inflation and income inequality are reduced without sacrificing output growth if the government assumes a leadership role compared with a regime in which monetary and fiscal policy are determined simultaneously. Further, it is shown that government leadership benefits both the fiscal and monetary authorities through the enhanced coordination that this arrangement implies.

Suggested Citation

Hughes Hallett, Andrew J. and Weymark, Diana N., Fiscal Leadership and Central Bank Design. Canadian Journal of Economics, Vol. 40, No. 2, pp. 607-627, May 2007, Available at SSRN: https://ssrn.com/abstract=986762 or http://dx.doi.org/10.1111/j.1365-2966.2007.00423.x

Andrew J. Hughes Hallett

Cardiff Business School ( email )

Aberconway Building
Cardiff CF10 3EU
United Kingdom
+44 292 087 001 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States
615-322-8539 (Phone)
615-343-8495 (Fax)

Diana N. Weymark (Contact Author)

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States
615-322-3445 (Phone)
615-343-8495 (Fax)

HOME PAGE: http://people.vanderbilt.edu/~diana.weymark/

Western Washington University ( email )

516 High Street
Bellingham, WA 98225-9077
United States
360-650-2867 (Phone)
360-650-4844 (Fax)

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