140-10
Universität Siegen
Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht
Volkswirtschaftliche Diskussionsbeiträge
Carsten Hefeker and Blandine Zimmer
Central bank independence and conservatism under uncertainty: Substitutes or complements?
This paper revisits the trade-off between central bank independence and conservatism using a New Keynesian model with uncertainty about the central banker's output gap target. It is shown that when this uncertainty is high, the trade-off no longer holds. In this case, the optimal combination between independence and conservatism is characterised by complementarity.