Promises, Promises: Credible Policy Reform via Signalling
AbstractEmpirical experience and theory both suggest that policy reforms can be aborted or reversed if they lack sufficient credibility. One reason for credibility problems is the doubt regarding how serious the government really is about the reform. This paper considers a framework in which the private sector is unable to distinguish between a genuinely reformist government and a government that simply feigns interest in reform because it is a precondition for foreign assistance. The general conclusion is that the magnitude of the reform may serve to convey the government's future intentions and, hence, act as a signal of its "type." Copyright 1989 by Royal Economic Society.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 99 (1989)
Issue (Month): 397 (September)
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Other versions of this item:
- Dani Rodrik, 1988. "Promises, Promises: Credible Policy Reform via Signaling," NBER Working Papers 2600, National Bureau of Economic Research, Inc.
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- Barro, Robert J & Gordon, David B, 1983.
"A Positive Theory of Monetary Policy in a Natural Rate Model,"
Journal of Political Economy,
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NBER Working Papers
2939, National Bureau of Economic Research, Inc.
- Persson, Torsten & van Wijnbergen, Sweder, 1993. "Signalling, Wage Controls and Monetary Disinflation Policy," Economic Journal, Royal Economic Society, vol. 103(416), pages 79-97, January.
- Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
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