Paper number: 95/18

Paper date: October 1995

Year: 1995

Paper Category: Discussion Paper


Ben Lockwood

University of Exeter and CEPR*


This paper shows that delegation of monetary policy to a central banker (CB) who is conservative in Rogoff's sense can still be desireable even though the government is able to set employment and/or inflation targets for the CB. A necessary and sufficient condition for Rogoff-conservatism is that the private sector is at some stage better informed about the structure of the economy than the goverment is at the date of delegation. Such asymmetric information is shown ato arise naturally in multi-period settings where the CB and private sector can aquire over time information about processes generating supply shocks.

First version: October 1994
This version: October 1995

JEL Classification numbers: E52, E58.

I would like to thank Berthold Herrendorf, Paul Weller, and seminar participants at the Universities of Leicester, Edinburgh, Manchester, and Stockholm and at a CEPR Workshop on Monetary Policy for helpful comments.

*Mailing address: Department of Economics, University of Exeter, Exeter, EX4 4RJ.