An investigation of the gains from commitment in monetary policy
By: Ernst Schaumburg and Andrea Tambalotti.
Contributors: Tambalotti, Andrea, 1973-; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 171; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 171.
Publisher: Federal Reserve Bank of New York
Published: 2003
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Monetary policy -- Econometric models.
Description: "This paper proposes a simple framework for analyzing a continuum of monetary policy rules characterized by differing degrees of credibility, in which commitment and discretion become special cases of what we call quasi commitment.  The monetary policy authority is assumed to formulate optimal commitment plans, to be tempted to renege on them, and to succumb to this temptation with a constant exogenous probability known to the private sector.  By interpreting this probability as a continuous measure of the (lack of) credibility of the monetary policy authority, we investigate the welfare effect of a marginal increase in credibility.  Our main finding is that, in a simple model of the monetary transmission mechanism, most of the gains from commitment accrue at relatively low levels of credibility"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
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Mode of access: World Wide Web.