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serves as a substitute for commitment, enabling the central bank to achieve the efficient Ramsey equilibrium and avoid the … inefficient, time-inconsistent one-shot Nash equilibrium. We find that reputation is a poor substitute for commitment. We then … that these mechanisms have only small or transitory effects on welfare. Surprisingly, the real effects of supply shocks are …
Persistent link: https://www.econbiz.de/10011572114
periodic reviews and adaptation. Replacing meeting-by-meeting discretion with a simple policy rule would eschew discretion in …
Persistent link: https://www.econbiz.de/10011327424
A common finding in the literature is that forward guidance cannot be credible under discretionary policy as long as the zero lower bound is an one-off event. However, this is not the case when recurring episodes of zero interest rates are possible. In this paper, we contribute to this new...
Persistent link: https://www.econbiz.de/10012153467
, deficit and monetary rules, both in effectiveness at curbing public spending and welfare for private agents. However … shocks, the optimal ceiling on U.S. federal revenue is about 15% of GDP, which leads to welfare gains for private agents …
Persistent link: https://www.econbiz.de/10012137093
Despite a number of helpful changes, including the adoption of an inflation target, the Fed's monetary policy strategy proved insufficiently resilient in recent years. While the Fed eased policy appropriately during the pandemic, it fell behind the curve during the post-pandemic recovery. During...
Persistent link: https://www.econbiz.de/10014479735
function under commitment. We consider two alternative specifications for the loss function. The first specification includes … we are faced with the time-inconsistency problem under commitment, we initialize our estimates by considering a presample …
Persistent link: https://www.econbiz.de/10011610240
degrees of credibility, in which commitment and discretion become special cases of what we call quasi commitment. The monetary … measure of the (lack of) credibility of the monetary policy authority, we investigate the welfare effect of a marginal … from commitment accrue at relatively low levels of credibility. …
Persistent link: https://www.econbiz.de/10001783067
In the span of fifteen years, central bank transparency has gone from being highly controversial to an accepted broad goal to which all central banks pay at least lip service. Yet, like many other broad concepts in economic policy, what central bank transparency actually means remains rather...
Persistent link: https://www.econbiz.de/10014116091
We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli … sustainable plans (Chari and Kehoe, 1990). Both interpretations of “imperfect credibility” in optimal monetary policy design are … attempts to rationalize outcomes that lie in between the conventional extremes of optimal policy under commitment and under …
Persistent link: https://www.econbiz.de/10012988836
monetary-fiscal interactions where the central bank has a limited degree of commitment to follow policies over time and the … importantly, the additional fiscal conditionality can enhance the credibility of the central bank to achieve price stability. We … emphasize how the level and structure of government debt emerge as key factors affecting the credibility of monetary policy with …
Persistent link: https://www.econbiz.de/10012886819