optimal monetary and fiscal policies under commitment and discretion. With symmetric rigidities, fiscal policy will not be … the case under discretion. We conduct numerical analyses to assess the welfare gains from commitment and from having … rates and the terms of trade. Under commitment, both monetary policy and relative spending are inertial, while this is not …

. 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 …

-looking. Specifically, optimal monetary policy under commitment is associated with a determinate REE that is stable under learning, whereas …, under discretion, the central bank has to be sufficiently inflation averse for the equilibrium to have these properties. …

-looking. Specifically, optimal monetary policy under commitment is associated with a determinate REE that is stable under learning, whereas …, under discretion, the central bank has to be sufficiently inflation averse for the equilibrium to have these properties. …

We re-examine optimal monetary policy when lump-sum taxes are unavailable. Under commitment, we show that, with … the reverse. Under discretion, we show that the economy will not necessarily tend to the Friedman Rule, as Obstfeld found …. Instead it may tend to the critical debt level at which there is no cheating incentive under commitment, and inflation and …

asynchronous game framework that generalises the standard commitment analysis. It allows concurrent and partial commitment; both … outcomes can be prevented if monetary commitment is sufficiently strong relative to fiscal commitment. Interestingly, monetary … commitment can not only resist fiscal pressure, but also discipline an ambitious fiscal policy maker to achieve socially …

This paper proposes a method and a toolkit for solving optimal policy with imperfect commitment in linear quadratic … monetary policy. We apply our method to the Smets and Wouters (2007) model, where we show that imperfect commitment has …

commitment, flexible exchange rates generally dominate a monetary union (or fixed exchange rate) regime. Under discretion, this … exchange rate) is a cost under commitment, whereas it is a benefit under discretion, for it acts like a commitment device. …

The objectives of this paper are: first, to quantify the stabilization welfare gains from commitment; second, to … examine how commitment to an optimal rule can be sustained as an equilibrium and third, to find a simple interest rate rule … that closely approximates the optimal commitment one. We utilize an influential empirical micro-founded DSGE model, the …