On two notions of imperfect credibility in optimal monetary policies

Ippei Fujiwara, Timothy Kam and Takeki Sunakawa

Economics Letters, 2019, vol. 174, issue C, 22-25

Abstract: We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) with the non-reoptimization probability of α can be interpretable as outcomes of deeper optimal policy under sustainable plans (Chari and Kehoe, 1990) with N-period punishment. In a standard monetary-policy framework, we show that, for any sufficiently high value of α, there exists an integer N such that impulse responses to the cost-push shock under each policy are similar to each other.

Keywords: Imperfect credibility; Monetary policy; Sustainable policy (search for similar items in EconPapers)
JEL-codes: E52 E58 E61 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:174:y:2019:i:c:p:22-25

DOI: 10.1016/j.econlet.2018.10.010

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