Credibility of Optimal Monetary Delegation: Comment

摘要

In a paper published not so long ago in this journal, Henrik Jensen (1997) argued that delegation of monetary policy to an independent central bank does not improve the credibility of optimal monetary policy. He writes, "in fact, the chances of attaining credibility decrease" (his italics). He obtains this striking result from an analysis in which he assumes that the independence of the central bank is protected by reap-pointment costs, which the government bears if it intervenes to alter the contract under which the central bank operates and thereby manipulates the central bank's policy actions at short notice. This result runs counter to many people's intuition about the effects of reappoint-ment costs. Most would imagine that such costs would protect a central bank from interference from elected politicians, and thereby enhance credibility. Jensen's result seems to substantiate Bennett T. McCallum's (1995, 1997) criticism that delegation does not solve the time-inconsistency problem of monetarypolicy, but merely relocates it.