Imperfect Credibility versus No Credibility of Optimal Monetary Policy

@article{Chatelain2021ImperfectCV,
  title={Imperfect Credibility versus No Credibility of Optimal Monetary Policy},
  author={Jean-Bernard Chatelain and Kirsten Ralf},
  journal={ERN: Forecasting \& Simulation (Monetary) (Topic)},
  year={2021}
}
A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete lack of credibility, with the certainty that the policy maker will renege his commitment ("optimal discretion"), leads to the local instability of inflation dynamics. In the textbook example of the new-Keynesian Phillips curve, the response of the policy… 
Ramsey Optimal Policy versus Multiple Equilibria with Fiscal and Monetary Interactions
We consider a frictionless constant endowment economy based on Leeper (1991). In this economy, it is shown that, under an ad-hoc monetary rule and an ad-hoc fiscal rule, there are two equilibria. One
Super-Inertial Interest Rate Rules Are Not Solutions of Ramsey Optimal Monetary Policy
Giannoni and Woodford (2003) found that the equilibrium determined by com- mitment to a super-inertial rule (where the sum of the parameters of lags of interest rate exceed ones and does not depend
How macroeconomists lost control of stabilization policy: towards dark ages
Abstract This paper is a study of the history of the transplant of mathematical tools using negative feedback for macroeconomic stabilisation policy from 1948 to 1975 and the subsequent break of the
The Indeterminacy of Determinacy with Fiscal, Macro-Prudential or Taylor Rules
The determinacy of dynamic stochastic general equilibrium models including fiscal, macro-prudential or Taylor rules relies on the assumption that policy instruments are forward-looking when policy
The Welfare of Ramsey Optimal Policy Facing Auto-Regressive Shocks
With non-controllable auto-regressive shocks, the welfare of Ramsey optimal policy is the solution of a single Riccati equation of a linear quadratic regulator. The existing theory by Hansen and

References

SHOWING 1-10 OF 23 REFERENCES
On two notions of imperfect credibility in optimal monetary policies
A Note on Imperfect Credibility
We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) can be observationally equivalent, or interpretable as outcomes
The Science of Monetary Policy: A New Keynesian Perspective
This paper reviews the recent literature on monetary policy rules. We exploit the monetary policy design problem within a simple baseline theoretical framework. We then consider the implications of
How Credible Is the Federal Reserve? A Structural Estimation of Policy Re-optimizations
The paper proposes a new measure of the degree of credibility of the Federal Reserve. We estimate a medium-scale macroeconomic model, where the central bank has access to a commitment technology, but
Can We Identify the Fed's Preferences?
Using US data, we estimate optimal policy with a probability below one that the Fed reneges on its commitment ("limited credibility") versus discretionary policy where the Fed reneges on its
Discretion Rather than Rules: Equilibrium Uniqueness and Forward Guidance with Inconsistent Optimal Plans
New Keynesian economies with active interest rate rules gain equilibrium determinacy from the central bank?s incredible off-equilibrium-path promises (Cochrane, 2011). We suppose instead that the
HOPF BIFURCATION FROM NEW-KEYNESIAN TAYLOR RULE TO RAMSEY OPTIMAL POLICY
This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative
A Simple Algorithm for Solving Ramsey Optimal Policy with Exogenous Forcing Variables
This article presents an algorithm that extends Ljungqvist and Sargent's (2012) dynamic Stackelberg game to the case of dynamic stochastic general equilibrium models including forcing variables. Its
How macroeconomists lost control of stabilization policy: towards dark ages
Abstract This paper is a study of the history of the transplant of mathematical tools using negative feedback for macroeconomic stabilisation policy from 1948 to 1975 and the subsequent break of the
Empirical Evidence on Inflation Expectations in the New Keynesian Phillips Curve
We review the main identification strategies and empirical evidence on the role of expectations in the New Keynesian Phillips curve, paying particular attention to the issue of weak identification.
...
...