Expectations, Credibility, And Time-Consistent Monetary Policy
AbstractThis paper addresses the problem of multiple equilibria ina model of time-consistent monetary policy. It suggests that this problemoriginates in the assumption that agents have rational expectations andproposes several alternative restrictions on expectations that allow themonetary authority to build credibility for a disinflationary policy bydemonstrating that it will stick to that policy even if it imposes short-runcosts on the economy. Starting with these restrictions, the paper derivesconditions that guarantee the uniqueness of the model s steady state;monetary policy in this unique steady state involves the constant deflationadvocated by Milton Friedman.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 4 (2000)
Issue (Month): 04 (December)
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Other versions of this item:
- Peter N. Ireland, 1999. "Expectations, Credibility, and Time-Consistent Monetary Policy," NBER Working Papers 7234, National Bureau of Economic Research, Inc.
- Peter N. Ireland, 1998. "Expectations, credibility, and time-consistent monetary policy," Working Paper 9812, Federal Reserve Bank of Cleveland.
- Peter N. Ireland, 1999. "Expectations, Credibility, and Time-Consistent Monetary Policy," Boston College Working Papers in Economics 425, Boston College Department of Economics.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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