On two notions of imperfect credibility in optimal monetary policies

Ippei Fujiwara; Timothy Kam; Takeki Sunakawa

doi:10.1016/j.econlet.2018.10.010

On two notions of imperfect credibility in optimal monetary policies

Ippei Fujiwara, Timothy Kam, Takeki Sunakawa^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

Abstract

We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) with the non-reoptimization probability of [Formula presented] can be interpretable as outcomes of deeper optimal policy under sustainable plans (Chari and Kehoe, 1990) with [Formula presented]-period punishment. In a standard monetary-policy framework, we show that, for any sufficiently high value of [Formula presented], there exists an integer [Formula presented] such that impulse responses to the cost-push shock under each policy are similar to each other.

Original language	English
Pages (from-to)	22-25
Number of pages	4
Journal	Economics Letters
Volume	174
DOIs	https://doi.org/10.1016/j.econlet.2018.10.010
Publication status	Published - Jan 2019

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10.1016/j.econlet.2018.10.010

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title = "On two notions of imperfect credibility in optimal monetary policies",

abstract = "We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) with the non-reoptimization probability of [Formula presented] can be interpretable as outcomes of deeper optimal policy under sustainable plans (Chari and Kehoe, 1990) with [Formula presented]-period punishment. In a standard monetary-policy framework, we show that, for any sufficiently high value of [Formula presented], there exists an integer [Formula presented] such that impulse responses to the cost-push shock under each policy are similar to each other.",

keywords = "Imperfect credibility, Monetary policy, Sustainable policy",

author = "Ippei Fujiwara and Timothy Kam and Takeki Sunakawa",

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doi = "10.1016/j.econlet.2018.10.010",

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T1 - On two notions of imperfect credibility in optimal monetary policies

AU - Fujiwara, Ippei

AU - Kam, Timothy

AU - Sunakawa, Takeki

PY - 2019/1

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N2 - We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) with the non-reoptimization probability of [Formula presented] can be interpretable as outcomes of deeper optimal policy under sustainable plans (Chari and Kehoe, 1990) with [Formula presented]-period punishment. In a standard monetary-policy framework, we show that, for any sufficiently high value of [Formula presented], there exists an integer [Formula presented] such that impulse responses to the cost-push shock under each policy are similar to each other.

AB - We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) with the non-reoptimization probability of [Formula presented] can be interpretable as outcomes of deeper optimal policy under sustainable plans (Chari and Kehoe, 1990) with [Formula presented]-period punishment. In a standard monetary-policy framework, we show that, for any sufficiently high value of [Formula presented], there exists an integer [Formula presented] such that impulse responses to the cost-push shock under each policy are similar to each other.

KW - Imperfect credibility

KW - Monetary policy

KW - Sustainable policy

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DO - 10.1016/j.econlet.2018.10.010

M3 - Article

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VL - 174

SP - 22

EP - 25

JO - Economics Letters

JF - Economics Letters

ER -

On two notions of imperfect credibility in optimal monetary policies

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