A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information

@article{Cukierman1986ATO,
  title={A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information},
  author={A. Cukierman and A. Meltzer},
  journal={Econometrics},
  year={1986},
  volume={54},
  pages={1099}
}
  • A. Cukierman, A. Meltzer
  • Published 1986
  • Economics
  • Econometrics
  • This paper develops a positive theory of credibility, ambiguity, and inflation under discretion and asymmetric information. The monetary policymaker maximizes his own (politically motivated) objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth. The relative importance he assigns to each target shifts stochastically through time. His current preference trade-off is known to him but not to the public. When… CONTINUE READING
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