Kydland and Prescott (1977) consider the issue of the time-inconsistency of optimal policy and its source. Our paper provides additional insight on this issue. They develop a simple model of monetary policy making, where the central bank needs some commitment technique to achieve optimal...

This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a...

Candel-Sanchez and Campoy-Minarro (2004) argue that the Walsh linear inflation contract does not prove optimal when the government concerns itself about the cost of the central bank contract. This result relies on the authors. assumption that the participation constraint does not represent an...

This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a...

Approaching monetary policy as a principal agent problem provides a useful framework for interpreting alternative delegation schemes. In this paper, we consider the effectiveness of central banker incentive schemes when the principal delegates monetary policy through contracts but remains...

This paper examines the magnitude and timing of the effects of changes in the monetary base on the aggregate and regional changes in bank loans within the United States. We consider both Bureau of Economic Analysis (BEA) regions, and individual states and the District of Columbia for our...

This paper examines four equivalent methods of optimal monetary policymaking, committing to the social loss function, using discretion with the central bank long-run and short-run loss functions, and following monetary policy rules. All lead to optimal economic performance. The same performance...

This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a...

This paper considers the contacting approach to central banking in the context of a simple common agency model. The recent literature on optimal contracts suggests that the political principal of the central bank can design the appropriate incentive schemes that remedy for time-inconsistency...

Kydland and Prescott (1977) consider the issue of the time-inconsistency of optimal policy and its source. Our paper provides additional insight on this issue. They develop a simple model of monetary policy making, where the central bank needs some commitment technique to achieve optimal...