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Chapter 25: Q.21 (page 676)

What traits characterize a 鈥渃onservative鈥� central banker?

Short Answer

Expert verified

Committed to maintaining low and steady inflation is the trait of conservative central banker.

Step by step solution

01

Content Introduction

The stability bias of discretionary monetary policy is solved by a conservative central banker who places more emphasis on inflation stabilization than the social planner. The welfare costs of departing from the ideal level of monetary conservatism are asymmetric, as shown in this note.

02

Content Explanation

A central banker who is conservative is someone who has a great hatred for inflation. In other words, a conservative central banker would be appointed to project a strong anti-inflation stance and be devoted to maintaining low and stable inflation.

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