CiteWeb id: 19830000047

CiteWeb score: 4687

DOI: 10.1016/0304-3932(83)90051-X

In a discretionary regime the monetary authority can print more money and create more inflation than people expect. But, although these inflation surprises can have some benefits, they cannot arise systematically in equilibrium when people understand the policymaker's incentives and form their expectations accordingly. Because the policymaker has the power to create inflation shocks ex post, the equilibrium growth rates of money and prices turn out to be higher than otherwise. Therefore, enforced commitments (rules) for monetary behavior can improve matters. Given the repeated interaction between the policymaker and the private agents, it is possible that reputational forces can substitute for formal rules.Here, we develop an example of a reputational equilibrium where the out-comes turn out to be weighted averages of those from discretion and those from the ideal rule. In particular, the rates of inflation and monetary growth look more like those under discretion when the discount rate is high. (This abstract was borrowed from another version of this item.)

The publication "Rules, Discretion and Reputation in a Model of Monetary Policy" is placed in the Top 10000 of the best publications in CiteWeb. Also in the category Economics it is included to the Top 1000. Additionally, the publicaiton "Rules, Discretion and Reputation in a Model of Monetary Policy" is placed in the Top 100 among other scientific works published in 1983.
Links to full text of the publication: