OPTIMAL IMPLEMENTATION DELAYS: WHEN SHOULD POLICIES BE ANNOUNCED?

Christian Jensen ()

Scottish Journal of Political Economy, 2007, vol. 54, issue 4, 492-507

Abstract: While a delay between the publication and implementation of a policy can make the time‐consistent solution capture the expectational effects that make commitment superior to discretion, this comes at the cost of a suboptimal present‐period policy. This cost is larger the longer the delay, and the more extreme the prevailing conditions, making the optimal duration of an implementation delay vary over time as initial conditions change. Therefore, we integrate over these to choose the implementation delay that will do best on average. The optimal delay is usually of intermediate length, balancing commitment gains with the loss of responsiveness to contemporary needs.

Date: 2007
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