The paper discusses key elements of optimal central bank design and applies its findings to the Eurosystem. A …

The empirical literature on central banking has found measures of central bank independence/conservatism to be …. We find that an increase in central bank conservatism leads to higher short-term interest rates and a more activist … economy, higher output and somewhat lower inflation. We also investigate the interaction between the central bank and the …

welfare gain associated with making the central bank less conservative than society, however if the outside option is in real … of central bank conservatism. …