Evaluating Policy Rules Under Imperfect Credibility

Paul Masson and Steven Symansky

No 1991/128, IMF Working Papers from International Monetary Fund

Abstract: Evaluation of policy rules using empirical macroeconomic models is usually done on the assumption that the rules are perfectly credible. However, there are usually circumstances that cause the authorities to abandon any given rule. The public's expectations reflect this possibility. In the paper, credibility is assumed to depend on the probability that the authorities will abandon a rule because the resulting utility exceeds that from maintaining the rule. Simulations of a disinflation policy leading to price stability are presented. Its credibility varies over time, depending on the paths for output and inflation.

Keywords: WP; policy rule; disinflation policy; policy goal; policy choice; fall-back policy; Inflation; Capacity utilization (search for similar items in EconPapers)
Pages: 24
Date: 1991-12-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=1005 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1991/128

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().