price stability. The benefits of credibility (private inflation expectations coinciding with the inflation target) are … discussed. Credibility improves the tradeoff between inflation variability, output-gap variability and instrument variability …

price stability. The benefits of credibility (private inflation expectations coinciding with the inflation target) are … discussed. Credibility improves the tradeoff between inflation variability, output-gap variability and instrument variability …

optimal even when inflation is lower. This result provides a reconciliation of the theory regarding the optimality of adopting … credibility or high inflation but are less inclined to do so otherwise …

. Imperfect credibility narrows the scope for discretion and enhances the benefits of adopting a rule …

. Cases in which policy credibility is ignored or treated as exogenous are distinguished from cases in which credibility and … inflation expectations respond endogenuously policy credibility strengthens the case for forward-looking inflation forecast …