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Date
2011-07Type
- Working Paper
ETH Bibliography
yes
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Abstract
We introduce a new type of incentive contract for central bankers: inflation forecast contracts, which make central bankers’ remunerations contingent on the precision of their inflation forecasts. We show that such contracts enable central bankers to influence inflation expectations more effectively, thus facilitating more successful stabilization of current inflation. Inflation forecast contracts improve the accuracy of inflation forecasts, but have adverse consequences for output. On balance, paying central bankers according to their forecasting performance improves welfare. Show more
Permanent link
https://doi.org/10.3929/ethz-a-006562013Publication status
publishedJournal / series
Economics Working Paper SeriesVolume
Publisher
ETH Zurich, Center of Economic Research (CER-ETH)Subject
Central banks; Transparency; Incentive contracts; Intermediate targets; Inflation forecast targeting; Inflation targetingOrganisational unit
02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.03729 - Gersbach, Hans / Gersbach, Hans
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Is previous version of: http://hdl.handle.net/20.500.11850/93687
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ETH Bibliography
yes
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