Promises, Promises: Credible Policy Reform via Signaling
AbstractEmpirical experience and theory both suggest that policy reforms can be aborted or reversed if they lack sufficient credibility, One reason for such credibility problems is the legitimate doubt regarding how serious the government really is about :he reform process. This paper considers a framework in which the private sector is unable to distinguish between a genuinely reformist government and its nemesis, a government which simply feigns interest in reform because it is a precondition for foreign assistance The general conclusion is that the rate at which reforms are introduced may serve to convey the government's future intentions, and hence act as a signal of its "type". More specifically, credible policy reform may require going overboard: the government will have to go much farther than it would have chosen to in the absence of the credibility problem.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2600.
Date of creation: May 1988
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Other versions of this item:
- Rodrik, Dani, 1989. "Promises, Promises: Credible Policy Reform via Signalling," Economic Journal, Royal Economic Society, vol. 99(397), pages 756-72, September.
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