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The first part of this paper outlines the concept of democratic accountability of central banks, and compares the legal accountability of the ECB with some other central banks (Bank of Canada, Bank of Japan, Bank of England and the Federal Reserve System). In the second part, we present a theory of central bank accountability. Two aspects of accountability are considered: transparency of actual monetary policy and the question of who bears final responsibility for monetary policy. The paper shows that accountability through transparency leads to a lower expected rate of inflation and less stabilization of supply shocks. Accountability through shifting final responsibility in the direction of the government leads to higher inflationary expectations and more stabilization of supply shocks.

There is a broad consensus in the literature that costs of information processing and acquisition may generate costly disagreements in expectations among economic agents, and that central banks may play a central role in reducing such dispersion in expectations. This paper analyses empirically whether enhanced central bank transparency lowers dispersion among professional forecasters of key economic variables, using a large set of proxies for central bank transparency in 12 advanced economies. It finds evidence for a significant and sizeable effect of central bank transparency on forecast dispersion, be it by means of announcing a quantified inflation objective, other forms of communication, or by publishing central banks' inflation and output forecasts. However, there also appear to be limits to central bank transparency, with decreasing marginal returns to enhancing (economic) transparency, and given our findings that disagreement among inflation expectations in the general public is not affected by the various central bank transparency measures analyzed in this paper.

The paper builds a simplified model describing the economy of a currency union with decentralised national fiscal policy, where the main features characterising the policy-making are similar to those in EMU. National governments choose the size of deficit taking into account the two main rules of the Stability and Growth Pact on public finance. Unlike previous literature the asymmetric working of those rules is explicitly modelled in order to identify its impact on the Nash equilibrium of deficits arising from a game of strategic interaction between fiscal authorities in the union.

The European Central Bank (ECB) is widely considered to be (legally) independent. Buiter (1999) critizes the ECB for its lack of democratic accountability, which he does not define in a very precise way. Issing (1999) replies to some of the points raised by Buiter and argues that the ECB is both accountable and transparent. We first outline the concept of democratic accountability of central banks, before we comment on some of the disagreements between Buiter and Issing. Furthermore, we compare the legal accountability of the ECB with those of some other central banks (Bank of Canada, Bank of Japan, Bank of England and the Federal Reserve System).

The first part of this paper outlines the concept of democratic accountability of central banks, and compares the legal accountability of the ECB with some other central banks (Bank of Canada, Bank of Japan, Bank of England and the Federal Reserve System). In the second part, we present a theory of central bank accountability. Two aspects of accountability are considered: transparency of actual monetary policy and the question of who bears final responsibility for monetary policy. The paper shows that accountability through transparency leads to a lower expected rate of inflation and less stabilization of supply shocks. Accountability through shifting final responsibility in the direction of the government leads to higher inflationary expectations and more stabilization of supply shocks. ; Der erste Teil dieses Papiers umreißt das Konzept der demokratischen Rechenschaftslegung von Zentralbanken und vergleicht die gesetzlich festgelegte Rechenschaftspflicht der EZB mit der einiger anderer Zentralbanken (Bank of Canada, Bank of Japan, Bank of England und Federal Reserve System). Im zweiten Teil stellen wir eine Theorie über die Rechenschaftspflicht der Notenbanken vor. Dabei werden zwei Aspekte der Rechenschaftspflicht in Betracht gezogen: die Transparenz der aktuellen Geldpolitik und die Frage, wer die endgültige Verantwortung für die Geldpolitik trägt. Das Papier zeigt auf, dass die Rechenschaftspflicht mittels Transparenz zu einer erwarteten niedrigeren Inflationsrate und einer geringeren Stabilisierung von Angebotsschocks führt. Dagegen führt die Rechenschaftspflicht mittels Verlagerung der endgültigen Verantwortung hin zur Regierung zu höheren Inflationserwartungen und einer stärkeren Stabilisierung von Angebotsschocks.

This paper develops a graphical method to determine the optimal degree of central bank conservativeness in an open economy. Unlike Rogoff (1985a), the upper & lower bounds of the interval containing the optimal degree of conservativeness are expressed in terms of the structural parameters of the model. It is shown that when optimal central bank conservativeness is higher, the higher the natural rate of unemployment, the greater the benefits of unanticipated inflation, the less inflation-averse society, the smaller the variance of productivity shocks, the smaller real exchange rate variability, & the smaller the openness of the economy. These propositions are tested for 19 industrial countries for the period 1960-1993. In testing the model, we employ a latent variables method (LISREL) in order to distinguish between actual & optimal monetary regimes. 1 Table, 1 Figure, 1 Appendix, 36 References. Adapted from the source document.