We revisit the question of what determines the credibility of macroeconomic policies here, of promises to repay public … probability, much conventional wisdom on the determinantes of credibility need no longer hold. For instance, appointing a … conservative policymaker or denominating public debt in foreign currency may reduce, not increase, credibility …

This paper surveys the recent literature on the theory of macroeconomic policy. We study the effect of various … incentive constraints on the policy making process, such as lack of credibility, political opportunism, political ideology, and …: it covers credibility issues, political business cycles, and optimal design of monetary institutions. Part II deals with …

credibility, because of time-inconsistency of the optimal policy under commitment, and (iii) coordination failure, because a …