Inflation, Institutions, and Preferences
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[S.l. : s.n.]
Number of pages
XII, 202 p.
Promotor: E. de Jong
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Faculteit der Managementwetenschappen
The institutional structure of monetary policy has seen some profound changes in recent decades. Exchange rate systems have prospered and perished. Periods of high inflation have given way to the present - more tranquil - times. Several theoretical models have been proposed to capture the essence of these dynamics. Based on these models, policy- and institutional-changes have been implemented, sometimes very drastically and successfully. The design of the European Central Bank, for instance, seems to be based directly on the insights of the mainstream (game)-theoretical literature. Although the theoretical models in de area of monetary policy have reached great sophistication, some empirical issues have been somewhat neglected. The present study sheds some light on three - related - issues. First, the interaction between exchange rate commitments and central bank independence. Both have been proposed as a means for efficient disinflation. However, a good evaluation requires a side-by-side comparison, as performed in this study. Secondly, the role of the exchange rate in the formation of inflationary expectations is highlighted. If the two aforementioned proposals work, the effectiveness of these policy-proposals might be increased if future effects are quickly incorporated in present actions through rapid adjustments of expectations. This claim is examined through survey evidence. Finally, the determinants of inflationary preferences, both on the individual and the aggregate level, are examined. In particular, the relationship between the financial sector inflation aversion and the resulting institutional structure is examined.
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