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Meixing Dai and Moïse Sidiropoulos
''Fiscal disciplining effect of central bank opacity: Stackelberg versus Nash equilibrium''
( 2011, Vol. 31 No.4 )
Several recent studies have shown that, when fiscal and monetary authorities play a Stackelberg game, central bank opacity has a fiscal disciplining effect in the sense that it induces the government to reduce taxes and public expenditures, leading hence to lower inflation and output distortions, and in general a lower macroeconomic variability. We show in this paper that, in a Nash equilibrium, the government is still disciplined by central bank opacity. However, the disciplining effect on the level and variability of inflation and the output gap is more likely dominated by the direct effect of opacity.
Keywords: Distortionary taxes, output distortions, central bank transparency (opacity), fiscal disciplining effect.
JEL: E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
Manuscript Received : Jun 13 2011 Manuscript Accepted : Nov 02 2011

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