Author's Keywords: Fixed Rates, Central Banks, Institutional substitution, Imperfect Institutions	Convention All Academic Convention makes running your annual conference simple and cost effective. It is your online solution for abstract management, peer review, and scheduling for your annual meeting or convention. Submission - Custom fields, multiple submission types, tracks, audio visual, multiple upload formats, automatic conversion to pdf. Review - Peer Review, Bulk reviewer assignment, bulk emails, ranking, z-score statistics, and multiple worksheets! Reports - Many standard and custom reports generated while you wait. Print programs with participant indexes, event grids, and more! Scheduling - Flexible and convenient grid scheduling within rooms and buildings. Conflict checking and advanced filtering. Communication - Bulk email tools to help your administrators send reminders and responses. Use form letters, a message center, and much more! Management - Search tools, duplicate people management, editing tools, submission transfers, many tools to manage a variety of conference management headaches! Click here for more information.
Association: Name: The Midwest Political Science Association URL: http://www.indiana.edu/~mpsa/
Citation: URL: http://www.allacademic.com/meta/p84377_index.html Direct Link: HTML Code:

Bodea, Cristina. "Exchange Rate Regimes and Independent Central Banks: A Correlated Choice of Imperfectly Credible Institutions" Paper presented at the annual meeting of the The Midwest Political Science Association, Palmer House Hilton, Chicago, Illinois, Apr 15, 2004 <Not Available>. 2009-05-26 <http://www.allacademic.com/meta/p84377_index.html>

Bodea, C. , 2004-04-15 "Exchange Rate Regimes and Independent Central Banks: A Correlated Choice of Imperfectly Credible Institutions" Paper presented at the annual meeting of the The Midwest Political Science Association, Palmer House Hilton, Chicago, Illinois Online <.PDF>. 2009-05-26 from http://www.allacademic.com/meta/p84377_index.html

Publication Type: Conference Paper/Unpublished Manuscript Review Method: Peer Reviewed Abstract: Why do we see in practice independent central banks coexisting with fixed exchange rates? Theoretical work on monetary policy has generally treated the two institutions as separate, substitutable solutions to time inconsistent inflation preferences. As such, the literature cannot explain why the alternative solutions coexist and is short of describing the interaction between the two. In this paper I develop a model that allows the government to act simultaneously in two areas: the exchange rate regime and the independence of the central bank. I find that imperfectly credible fixed rates and central bank explain why policy makers choose a mix of institutions that fight inflation. I also show that in bad times (hyperinflation, transition from authoritarian rule) it is more likely to have a right wing executive choosing the institution that guarantees a zero inflation rate even if the zero inflation rule is not totally believed by the public. Finally, when fixed rates are not effective in cutting inflation we see the right, the party with strong inflation credentials, becoming more likely to combine fixed rates with another inflation fighting mechanism .

Choosing Imperfectly Credible Institutions: Fixed Exchange Rates and Independent Central Banks

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