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Commitment as irreversible investment

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  • Joseph G. Haubrich
  • Joseph A. Ritter

Abstract

Considering time inconsistency as a problem of irreversible investment brings some neglected points to the fore. Making a policy choice in real time and under current conditions emphasizes the importance of the timing of commitment, the regret over past decisions, and the option value of not committing. This paper applies these concepts to monetary policy, banking regulation, and capital taxation.

Suggested Citation

  • Joseph G. Haubrich & Joseph A. Ritter, 1992. "Commitment as irreversible investment," Working Papers (Old Series) 9217, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:9217
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    References listed on IDEAS

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    Cited by:

    1. Joseph G. Haubrich & Joseph A. Ritter, 1996. "Dynamic commitment and imperfect policy rules," Working Papers (Old Series) 9601, Federal Reserve Bank of Cleveland.

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    Monetary policy;

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