Commitment as irreversible investment

Joseph Haubrich and Joseph Ritter

No 9217, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: Considering time inconsistency as a problem of irreversible investment brings some neglected points to the fore. Making a policy choice in real time and under current conditions emphasizes the importance of the timing of commitment, the regret over past decisions, and the option value of not committing. This paper applies these concepts to monetary policy, banking regulation, and capital taxation.

Keywords: Monetary; policy (search for similar items in EconPapers)
Date: 1992
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