public spending. Under commitment, optimal stabilization is obtained by combining an inflation target that is contingent on …

the case under discretion. We conduct numerical analyses to assess the welfare gains from commitment and from having … optimal monetary and fiscal policies under commitment and discretion. With symmetric rigidities, fiscal policy will not be … curves featuring public spending and mark-up shocks. We derive the second-order welfare loss approximation and characterize …

. Second, we show that the commitment (time inconsistent) solution does not normally involve zero inflation and output at its …, we show that the timeless perspective policy has the same steady state as the commitment case, but without any short …

and discretion. Under commitment, we find that the deliberate choice of sloppy control is far less likely under a standard …We examine a central bank's endogenous choice of degree of control and degree of transparency, under both commitment … central-bank loss function than reported for a less standard loss function by Cukierman and Meltzer. Under discretion, maximum …

Persson and Tabellini, and achieve the equilibrium corresponding to an optimal rule with commitment. Thus an `inflation target …. Inflation targets may on average be exceeded, and they may have imperfect credibility. Nevertheless they may usefully reduce …