lack verifiability, needed for credibility. Central banks announce intermediate targets such as exchange rates, so that the …

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 …

restrictions on expectations that allow the monetary authority to build credibility for a disinflationary policy by demonstrating …

We define and study transparency, credibility, and reputation in a model where the central bank's characteristics are … unobservable to the private sector and are inferred from the policy outcome. A low-credibility bank optimally conducts a more … inflationary policy than a high-credibility bank, in the sense that it induces higher inflation, but a less expansionary policy in …

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 …