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On the Unimportance of Commitment for Monetary Policy

Author

Listed:
  • Juan Paez-Farrell

    (Department of Economics, University of Sheffield, Sheffield S1 4DT, UK)

Abstract

In a New Keynesian model where the trade-off between stabilising the aggregate inflation rate and the output gap arises from sectoral asymmetries, the gains from commitment are either zero or negligible. Thus, to the extent that economic fluctu- ations are caused by sectoral shocks, policies designed to overcome the stabilisation bias are aiming to correct an unimportant problem.

Suggested Citation

  • Juan Paez-Farrell, 2023. "On the Unimportance of Commitment for Monetary Policy," Working Papers 2023018, The University of Sheffield, Department of Economics.
    • Handle: RePEc:shf:wpaper:2023018
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    File URL: https://www.sheffield.ac.uk/economics/research/serps
    File Function: First version, August 18 2023
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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