This paper studies the strategic value of delegation in dynamic interactions, where principals provide managers with intertemporal incentives in order to obtain a competitive advantage. While direct management offers intertemporal commitment opportunities, the separation of ownership from...

In this paper, we consider a dynamic New Keynesian model of the small open economy in the light of bounded rationality. This entails private agents and the central bank updating their beliefs about the laws of motion of inflation, the output gap and real exchange rate when forming their optimal...