Monetary Policy, Expectations and Commitment

George William Evans () and Seppo Mikko Sakari Honkapohja ()

Scandinavian Journal of Economics, 2006, vol. 108, issue 1, pages 15-38

Abstract: Commitment in monetary policy leads to equilibria that are superior to those from optimal discretionary policies. A number of interest-rate reaction functions and instrument rules have been proposed to implement or approximate commitment policy. We assess these rules in terms of whether they lead to a rational expectations equilibrium that is both locally determinate and stable under adaptive learning by private agents. A reaction function that appropriately depends explicitly on private sector expectations performs particularly well on both counts. Copyright The editors of the "Scandinavian Journal of Economics", 2006 .

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Working Paper: Monetary Policy, Expectations and Commitment (2002)
Working Paper: Monetary Policy, Expectations and Commitment (2005)
Working Paper: Monetary policy; expectations and commitment (2002)
Working Paper: Monetary Policy, Expectations and Commitment (2004)
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