Arbeitspapier
The tragedy of the commons and inflation bias in the euro area
Central bank credit has expanded dramatically in some of the euro area member countries since the beginning of the financial crisis. This paper makes two contributions to understand this stylized fact. First, we discuss a simple model of monetary policy that includes (i) a credit channel and (ii) a common pool problem in a monetary union. We illustrate that the interaction of the two elements leads to an inflation bias that is independent of the standard time-inconsistency bias. Secondly, we present empirical evidence that is consistent with the view of fragmented monetary policy and changing policy objectives among the national cen-tral banks in the euro area. We show that after 2007, central bank credit has been highly correlated with unemployment, but not with inflation in the respective countries.
- Language
-
Englisch
- Bibliographic citation
-
Series: CESifo Working Paper ; No. 4036
- Classification
-
Wirtschaft
Monetary Policy
Central Banks and Their Policies
Public Goods
- Subject
-
tragedy of the commons
inflation bias
credit channel
TARGET2
euro area
Geldpolitik
Kreditkanal
Europäische Wirtschafts- und Währungsunion
Gemeingüter
Inflation
Eurozone
- Event
-
Geistige Schöpfung
- (who)
-
Dinger, Valeriya
Steinkamp, Sven
Westermann, Frank
- Event
-
Veröffentlichung
- (who)
-
Center for Economic Studies and ifo Institute (CESifo)
- (where)
-
Munich
- (when)
-
2012
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Dinger, Valeriya
- Steinkamp, Sven
- Westermann, Frank
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2012
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