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...

We study a two-period model of committee decision-making where members differ in their levels of efficiency. They may acquire costly information that enhances their ability to make a correct decision. We focus on the impact of transparency. We show that the principal's initial utility is higher...

In this paper, we introduce a new requirement for bank capital: banking-on-the-average rules. Under these rules a bank’s required level of equity capital is monotonically increasing in the realized equity capital of its peers. In a simple model we illustrate the workings of...

We examine the provision of public projects under tax and subsidy rules. We find that tax rules separated from project cum subsidy decisions exhibit several advantages when incentive problems of the agenda-setter are taken into account. In particular, tax rules may prevent the proposal of...

This Paper compares the social efficiency of monetary targeting and inflation targeting when central banks may have private information on shocks to money demand and, because of verifiability problems, the transparency solution is not feasible. Under inflation targeting and monetary targeting,...

We examine whether the publication of forecasts concerning the likely future conduct of monetary policy is socially desirable. Introducing a new central bank loss function that accounts for the deviations from announcements, we incorporate forecasts about future inflation and interest rates into...

We examine whether the central bank council of a monetary union should publish its voting records when members are appointed by national politicians. We show that the publication of voting records lowers overall welfare if the private benefits of holding office are sufficiently low. High private...

We present a simple neoclassical model to explore how an aggregate bank-capital requirement can be used as a macroeconomic policy tool and how this additional tool interacts with monetary policy. Aggregate bank-capital requirements should be adjusted when the economy is hit by cost-push shocks...

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...

Tax schemes are more restricted by constitutional rules than subsidies. We introduce a model of public good provision with incentive problems in agenda-setting and identify several advantages of restrictions on tax schemes. In particular, tax rules may prevent the proposal and adoption of...