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Credibility and Changes in Policy Regime

  • Ruge-Murcia, Francisco J

This paper develops a rational expectations model of inflation in which the dynamics are driven by government expenditure and the effect of past inflation rates on the value of real taxes. Government spending follows an autoregressive process subject to discrete regime changes. The regimes are defined by whether the expenditure level is consistent with the rate of inflation targeted by the government. The agents do not observe the regime but construct probability inferences using data on inflation, interest rates, and spending. Credibility is quantified by the agents' inferred probability that the variables are in effect generated by the reformed regime. Copyright 1995 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/261980
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 103 (1995)
Issue (Month): 1 (February)
Pages: 176-208

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Handle: RePEc:ucp:jpolec:v:103:y:1995:i:1:p:176-208
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  1. N/A, 1986. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 118(1), pages 6-17, November.
  2. N/A, 1986. "Chapter II. The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 117(1), pages 20-29, August.
  3. Rudiger Dornbusch & Stanley Fischer, 1986. "Stopping Hyperinflations Past and Present," NBER Working Papers 1810, National Bureau of Economic Research, Inc.
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  10. Frenkel, Jacob A, 1977. "The Forward Exchange Rate, Expectations, and the Demand for Money: The German Hyperinflation," American Economic Review, American Economic Association, vol. 67(4), pages 653-70, September.
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  12. N/A, 1986. "Chapter II. The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 118(1), pages 18-29, November.
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  14. anonymous, 1986. "Economic notes," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, july.
  15. N/A, 1986. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 117(1), pages 5-19, August.
  16. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
  17. N/A, 1986. "Seasonal Patterns in the British Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 117(1), pages 33-42, August.
  18. Kiguel, Miguel A, 1989. "Budget Deficits, Stability, and the Monetary Dynamics of Hyperinflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 148-57, May.
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  20. N/A, 1986. "Chapte II. the World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 115(1), pages 27-43, February.
  21. LaHaye, Laura, 1985. "Inflation and Currency Reform," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 537-560, June.
  22. Salemi, Michael K & Sargent, Thomas J, 1979. "The Demand for Money during Hyperinflation under Rational Expectations: II," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(3), pages 741-58, October.
  23. anonymous, 1986. "Economic update," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, january.
  24. anonymous, 1986. "Economic notes," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, may.
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  26. -, 1986. "Escenarios de la economía mundial hasta 1990," Desarrollo Productivo 4557, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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  28. Flood, Robert P & Garber, Peter M, 1980. "An Economic Theory of Monetary Reform," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 24-58, February.
  29. anonymous, 1986. "Economic update," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, september.
  30. anonymous, 1986. "Quarterly review of the New Zealand economy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, february.
  31. anonymous, 1986. "Economic notes," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, march.
  32. Prachowny,Martin F. J., 1986. "Money in the Macroeconomy," Cambridge Books, Cambridge University Press, number 9780521315944, October.
  33. anonymous, 1986. "Quarterly review of the New Zealand economy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, may.
  34. N/A, 1986. "Chapter I. The Home Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 116(1), pages 5-18, May.
  35. Sargent, Thomas J & Wallace, Neil, 1973. "Rational Expectations and the Dynamics of Hyperinflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 328-50, June.
  36. anonymous, 1986. "Economic update," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, august.
  37. anonymous, 1986. "Economic update," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, may.
  38. anonymous, 1986. "Economic notes," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, september.
  39. anonymous, 1986. "Economic notes," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, january.
  40. anonymous, 1986. "Economic notes," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, june.
  41. anonymous, 1986. "Economic update," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, july.
  42. Barro, Robert J, 1970. "Inflation, the Payments Period, and the Demand for Money," Journal of Political Economy, University of Chicago Press, vol. 78(6), pages 1228-1263, Nov.-Dec..
  43. anonymous, 1986. "Quarterly review of the external economy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, april.
  44. N/A, 1986. "Chapter II. The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 116(1), pages 19-30, May.
  45. anonymous, 1986. "Economic updates," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, march.
  46. anonymous, 1986. "Quarterly review of the external economy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 49, july.
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