Theories of rules and discretion suggest that monetary policy rules are first best in terms of social welfare. However, if commitment is not feasible, delegating monetary policy to an independent and conservative central bank can be second best. Monetary policy in Germany during the past one...

Theories of rules and discretion suggest that monetary policy rules are first best in terms of social welfare. However, if commitment is not feasible, delegating monetary policy to an independent and conservative central bank can be second best. Monetary policy in Germany during the past one...

Theories of rules and discretion have become a corner stone in the formulation of macroeconomic policy. They suggest that monetary policy rules are first best in terms of social welfare. However, if commitment is not feasible, delegating monetary policy to an independent and conservative central...

Germany prides itself in having one of the most successful central banks and currencies with respect to independence and stability. I show that not only were both imposed on the country after 1945 but that there was also initial resistance to both among German experts and officials. This was...