The Time Inconsistency of Monetary Policy with Inflation Persistence

Richard Mash

No 15, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: In a monetary policy model incorporating partial persistence in inflation it is shown that inflation bias is reduced and the response to shocks improved if the policy maker has a discount rate lower than its true social value. Thus a patient central banker is shown to be a third mechanism for offsetting time inconsistency problems in addition to Rogoff`s conservative central banker and the principal-agent approach of Walsh. The paper also analyses outcomes under the latter regimes and the optimal rule, finding important differences from the results of earlier literature that excludes inflation persistence.

Keywords: monetary policy; time inconsistency; inflation persistence (search for similar items in EconPapers)
JEL-codes: C61 E52 E58 (search for similar items in EconPapers)
Date: 2000-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:f7aaa56f-7c0d-403b-b9e6-fbdc23fc41be (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:15

Access Statistics for this paper

More papers in Economics Series Working Papers from University of Oxford, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Anne Pouliquen ( this e-mail address is bad, please contact ).