Loose commitment in medium-scale macroeconomic models: theory and applications

Davide Debortoli, Junior Maih and Ricardo Nunes

No 1034, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper proposes a method and a toolkit for solving optimal policy with imperfect commitment. As opposed to the existing literature, our method can be employed in medium- and large-scale models typically used in monetary policy. We apply our method to the Smets and Wouters (2007) model, where we show that imperfect commitment has relevant implications for interest rate setting, the sources of business cycle fluctuations, and welfare.

Date: 2011
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: LOOSE COMMITMENT IN MEDIUM-SCALE MACROECONOMIC MODELS: THEORY AND APPLICATIONS (2014)
Working Paper: Loose commitment in medium-scale macroeconomic models: Theory and an application (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1034

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