When optimal monetary policy is subject to a credibility problem, it is often argued that the government should appoint a central banker whose incentives differ from the government's. I argue, however, that such delegation does not overcome credibility problems given that delegation is discretionary and without costs. "Reappointment costs" of delegation are shown to improve suboptimal outcomes, but credibility of optimal monetary policy turns out to be worsened. At best, delegation therefore has no effects on credibility, but only if reappointment has no costs.

Within a simple New Keynesian model emphasizing forward-looking behavior of private agents, I evaluate optimal nominal income growth targeting versus optimal inflation targeting. When the economy is mainly subject to shocks that do not involve monetary policy trade-offs for society, inflation targeting is preferable. Otherwise, nominal income growth targeting may be superior because it induces inertial policy making, which improves the inflation–output-gap trade-off. Somewhat paradoxically, inflation targeting may be relatively less favorable the more society dislikes inflation, and the more persistent are the effects of inflation-generating shocks.

Optimal Inflation Targets, "Conservative" Central Banks, and Linear Inflation Contracts: Comment by Roel M. W. J. Beetsma and Henrik Jensen. Published in volume 89, issue 1, pages 342-347 of American Economic Review, March 1999