Africana Periodical Literature 
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 Periodical article |
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| Title: | The democratic deficit and inflation targeting |
| Author: | Du Plessis, S.A. |
| Year: | 2005 |
| Periodical: | South African Journal of Economics |
| Volume: | 73 |
| Issue: | 1 |
| Pages: | 93-104 |
| Language: | English |
| Geographic term: | South Africa |
| Subjects: | inflation monetary policy |
| External link: | https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2005.00007.x/pdf |
| Abstract: | Inflation targeting solves two important political problems for a monetary policy regime. Separating goal and instrument independence at the central bank solves the first, the democratic deficit. However, this solution often leaves the ultimate goal of monetary policy in the hands of the ruling party, and this raises the second political problem at issue: the problem of limiting the scope of government in the design of the monetary policy rule. Delimiting the scope of government raises two problems: the positive problem of the paradox of power and the normative problem of how to evaluate rival institutions. Taking South Africa as a case study, this paper argues that the rule of law provides a set of criteria for the consistency of a solution to the positive problem of limiting the scope of government. Inflation targeting is largely consistent with the rule of law, in principle and also to a significant extent in the South African case (though the accountability and the limit on the power of government requires further reform, as indicated). Further, the paper argues that the Pareto-Wicksell criterion could be used in the normative evaluation of adopting inflating targeting as a rule to limit the discretion of the monetary authorities. Applying this criterion to the South African case adds normative and political economy support to the compelling positive case for inflation targeting. Bibliogr., notes, ref., sum. [ASC Leiden abstract] |
