On the unimportance of commitment for monetary policy
Theoretical Economics
2023-08-28 v2
Abstract
In a New Keynesian model where the trade-off between stabilising the aggregate inflation rate and the output gap arises from sectoral asymmetries, the gains from commitment are either zero or negligible. Thus, to the extent that economic fluctuations are caused by sectoral shocks, policies designed to overcome the stabilisation bias are aiming to correct an unimportant problem.
Cite
@article{arxiv.2308.08044,
title = {On the unimportance of commitment for monetary policy},
author = {Juan Paez-Farrell},
journal= {arXiv preprint arXiv:2308.08044},
year = {2023}
}
Comments
14 pages, 7 figures