Conquering Credibility for Monetary Policy under Sticky Confidence

Jaylson Jair da Silveira and Gilberto Lima

Revista Brasileira de Economia - RBE, 2015, vol. 69, issue 2

Abstract: We derive a best-reply monetary policy when the confidence by price setters on the monetary authority’s commitment to price level targeting is both incomplete and sticky. We find that complete confidence (or full credibility) is not a necessary condition for reaching a price level target. In fact, it is the reaching of a price level target for long enough that rather ensures the conquering of the greatest possible confidence. Evidently, this result has relevant implications for the conduct of monetary policy in pursuit of price stability.

Date: 2015
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Related works:
Working Paper: CONQUERING CREDIBILITY FOR MONETARY POLICY UNDER STICKY CONFIDENCE (2016)
Working Paper: Conquering Credibility for Monetary Policy under Sticky Confidence (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:69:y:2015:i:2:a:21107

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