Monetary Uncertainty, the Appropriate Choice of Central Banker and Social Welfare

A number of papers have identified the possiblity that percise monetary control or, alternatively, increased uncertainty with regards to the effects of monetary policy on the economy may enhance social welfare. The present paper introduces monetary uncertainty into a model of monetary policy delegation. It is shown that an increase in uncertainty has an ambiguous effect on the appropriate degreee of conservatism of an optimally chosen central banker, but produces an unambiguous fall in welfare. [PUBLICATION ABSTRACT]