Monetary policy, expectations and commitment
George Evans () and
Seppo Honkapohja ()
No 124, Working Paper Series from European Central Bank
Full commitment in monetary policy leads to equilibria that are superior to those from optimal discretionary policies. Different types of reactions functions to implement and instrument rules to approximate full commitment have been proposed in the literature. We assess optimal reaction functions and instrument rules, in terms of whether they lead to an RE equilibrium that is both locally determinate and stable under adaptive learning by private agents. The reaction function that appropriately depends explicitly on private expectations performs best on both counts. JEL Classification: E52, E31, D84
Keywords: adaptive learning; commitment; determinacy; interest rate setting; stability (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
Journal Article: Monetary Policy, Expectations and Commitment* (2006)
Working Paper: Monetary Policy, Expectations and Commitment (2005)
Working Paper: Monetary Policy, Expectations and Commitment (2004)
Working Paper: Monetary Policy, Expectations and Commitment (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2002124
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().