under discretion. Because the growth rate of money is closely related to the change in the interest rate and he growth of …

in welfare terms is equivalent to moving from discretion to precommitment, the inflation equivalent. In the estimated …

welfare losses associated with the presence of the zero bound. Under commitment, the gains associated with the use of the …

serves as a substitute for commitment, enabling the central bank to achieve the efficient Ramsey equilibrium and avoid the … inefficient, time-inconsistent one-shot Nash equilibrium. We find that reputation is a poor substitute for commitment. We then … better mitigated by a commitment regime than by any discretionary policy. Thus, we find that there is no trade-off between …

The objectives of this paper are: first, to quantify the stabilization welfare gains from commitment; second, to … examine how commitment to an optimal rule can be sustained as an equilibrium and third, to find a simple interest rate rule … that closely approximates the optimal commitment one. We utilize an influential empirical micro-founded DSGE model, the …

This paper proposes a method and a toolkit for solving optimal policy with imperfect commitment in linear quadratic … monetary policy. We apply our method to the Smets and Wouters (2007) model, where we show that imperfect commitment has …

, optimal monetary policy under commitment is associated with a determinate rational expectations equilibrium that is stable … under least squares learning for all parameter constellations considered, whereas, under discretion in policy-making, the …