Monetary policy, expectations and commitment

George W Evans, Seppo Honkapohja

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Sammanfattning

Commitment in monetary policy leads to equilibria that are superior to those from optimal discretionary policies. A number of interest-rate reaction functions and instrument rules have been proposed to implement or approximate commitment policy. We assess these rules in terms of whether they lead to a rational expectations equilibrium that is both locally determinate and stable under adaptive learning by private agents. A reaction function that appropriately depends explicitly on private sector expectations performs particularly well on both counts.
Originalspråkengelska
TidskriftScandinavian Journal of Economics
Volym108
Utgåva1
Sidor (från-till)15-38
Antal sidor24
ISSN0347-0520
DOI
StatusPublicerad - 2006
MoE-publikationstypA1 Tidskriftsartikel-refererad

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