Stories about central Banker scA straightforward way to kill inflation is to delegate central banker to a person with infinite aversion to inflation. i.e. e oIf there is no such a person, we can delegate central banker to a person with higher e(than social level). One can easily show that this can moderate time inconsistency problem. This approach was pointed out by Rogoff (1985, QJE) &Clearly public expectation towards inflation is closely related to the preference of central banker. But the problem is how can public know the banker's preference, and consequently adjust expectation of inflation? & This problem was first answered by 复9大学 Backus and Dritfill(1985, AER).They 4 assume there are two kinds of policymaker, one with 0 oo(tough banker) and one with 0w oo(weak banker). Let p, denote the expectedStories about Central Banker ❖ A straightforward way to kill inflation is to delegate central banker to a person with infinite aversion to inflation, i.e. θ = ∞. ❖ If there is no such a person, we can delegate central banker to a person with higher θ (than social level). One can easily show that this can moderate time inconsistency problem. This approach was pointed out by Rogoff (1985, QJE). ❖ Clearly public expectation towards inflation is closely related to the preference of central banker. But the problem is how can public know the banker’s preference, and consequently adjust expectation of inflation? ❖ This problem was first answered by Backus and Driffill (1985, AER). They assume there are two kinds of policymaker, one with θT = ∞ (tough banker) and one with θW < ∞ (weak banker). Let pt denote the expected probability of tough banker. The