Monetary Policy, Expectations and Commitment*
George Evans () and
Seppo Honkapohja ()
Scandinavian Journal of Economics, 2006, vol. 108, issue 1, 15-38
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.
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Working Paper: Monetary Policy, Expectations and Commitment (2005)
Working Paper: Monetary Policy, Expectations and Commitment (2004)
Working Paper: Monetary Policy, Expectations and Commitment (2002)
Working Paper: Monetary policy, expectations and commitment (2002)
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