Simultaneously, the central bank tries to anchor inflation expectations by promising to be even more conservative in the future. Overall, we find that the possibility that policy objectives may become more liberal generates
a negative externality for the conservative central bank. More interestingly, we also find that they lead to a contraction in current output, which is precisely the opposite of what pressures to adopt liberal policies may be aiming for. The more likely is the adoption of liberal objectives, the stronger are these effects. Along this dimension, the adoption of an inflation targeting regime seems to be preferable to a conservative central bank a la Rogoff, namely one with higher aversion towards inflation than society. An inflation targeting regime insulates more the central bank from external
pressures. Changing policy objectives indeed requires an institutional reform, rather
than simply appointing a chairman or advisors with different views.