Central bank reputation in a forward-looking model

Olivier Loisel

Journal of Economic Dynamics and Control, 2008, vol. 32, issue 11, 3718-3742

Abstract: This paper examines whether reputation concerns can induce the central bank to implement the time-inconsistent optimal monetary policy in the standard New Keynesian model. Interestingly, the forward-looking nature of this model enables us to account for the coordination of the private agents on the punishment length of their trigger strategy. Our results suggest that both the inflation bias and the stabilization bias can be overcome by a reputation-concerned central bank for the calibrations used in the literature. These results enable us to endogenize Woodford's timeless perspective and tend to weaken the case for recent monetary policy delegation proposals.

Keywords: Inflation; bias; Monetary; policy; Reputation; Stabilization; bias; Timeless; perspective (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (28)

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Related works:
Working Paper: Central Bank Reputation in a Forward-Looking Model (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:32:y:2008:i:11:p:3718-3742

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