Monetary Rules, Determinacy and Limited Enforcement

Eric Mengus and Jean Barthélemy

No 1202, HEC Research Papers Series from HEC Paris

Abstract: We investigate the ability of monetary policy rules to implement a unique equilibrium outcome when the enforcement of rules is limited. We combine the approach of Bassetto (2005) and Atkeson et al. (2010) to study implementation and the one by Chari and Kehoe (1990) to allow policy deviations. Our main result is that, under limited enforcement, there does not exist a policy rule that implements a unique outcome: the private sector can always deter the central bank to stick to the rule. We then provide further results on implementation when private agents expect a given policy and when they hesitate between multiple policies.

Keywords: Policy rules; determinacy; limited enforcement (search for similar items in EconPapers)
JEL-codes: E31 E52 E65 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-05-01, Revised 2019-05-11
New Economics Papers: this item is included in nep-mac and nep-mon
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Working Paper: Monetary Rules, Determinacy and Limited Enforcement (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1202

DOI: 10.2139/ssrn.2962259

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