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We investigate the ability of monetary policy rules to implement a unique equilibrium outcome when the enforcement of rules is limited. We combine the approach of Bassetto (2005) and Atkeson et al. (2010) to study implementation and the one by Chari and Kehoe (1990) to allow policy deviations....
Persistent link: https://www.econbiz.de/10012901948
This paper investigates the ability of monetary policy rules to coordinate private agents' expectations when the enforcement of rules is limited. We show that limited enforcement precludes diverging inflation paths ensuring that nominal variables remain bounded in equilibrium. When applied to...
Persistent link: https://www.econbiz.de/10012907600