The paper examines the current debate on the real effectiveness of delegation in overcoming the problem of time inconsistency that afflicts discretionary monetary policy. An important contribution by Jensen has shown that, when the government is unable to credibly carry out optimal policy and...

The celebrated inflationary bias of time consistent monetary policy is re-examined. To this end we consider an extended version of the simple Barro and Gordon framework featuring important aspects of actual policy making such as imperfect instrument control, overlapping wage contracts, policy...

A key issue in monetary policy is that on the importance of following systematic behaviours. The paper revisits the classic debate on rules versus discretion focusing on the design of instrument rules in a manner that push discretionary policy choices in the direction of the commitment...