A political economy model of monetary policy: decentralized decision making and competition for seigniorage

Abstract

A political economy model is developed to provide a rationale of monetary policy in high inflation regimes, such as the Brazilian experience until the advent of the Plano Real. Decision making of monetary policy is assumed to be decentralized, where several decision-makers competitively determine the quantity of money. It is shown that equilibrium inflation is higher than under the alternative monetary regime where decision making is centralized at the Central Bank. An important additional feature of this political economy model is that it does not rely on time-inconsistency to generate high and sub-optimal inflation.

A moral da dívida pública

“…Mas a racionalidade do eleitor não é perfeita devido a assimeque impele as unidades da federação a um comportamento perdulário e ao endividamento explosivo de seus bancos estaduais. Ver, também sobre o problema federativo brasileiro, dois importantes trabalhos sobre o tema: Hilbrecht & Rocha (1996) e Hilbrecht (1995). trias de informação e ao custo de obtê-la.…”