Two signaling games of monetary policy are considered: game one examines the effect of hysteresis on the labor market on the results of the repeated monetary policy game. Disciplinary effects of reputation disappear in presence of hysteresis. The second game compares weifare effects of monetary...

Two signaling games of monetary policy are considered: game one examines the effect of hysteresis on the labor market on the results of the repeated monetary policy game. Disciplinary effects of reputation disappear in presence of hysteresis. The second game compares weifare effects of monetary...

The paper provides an explanation to the policy of implicit exchange rate bands. Especially when introducing a new exchange rate band or modifying the old one, central banks often intervene intra-marginally, targeting a narrower band than that announced. The theoretical literature provides...

We explore the relationship between international policy coordination and domestic policy credibility when both must be self-supporting. Our arguments are presented in the context of a two-country, two-period model of dynamic emission abatement with transboundary pollution, where government...

This paper examines the mechanics of intertemporal information provision in dynastic governments. It has been suggested that "horizontal accountability," i.e., a system of governance where auditing functions lie outside the executive branch, can ensure credible disclosure of information. The...

We study the optimal design of a disinflation plan by a planner who lacks commitment. Having announced a plan, the Central banker faces a tradeoff between surprise inflation and building reputation, defined as the private sector's belief that the Central bank is committed to the plan. Some plans...

We study the optimal design of a disinflation plan by a planner who lacks commitment and has imperfect control over inflation. The government’s reputation for being committed to the plan evolves as the public compares realized inflation to the announced targets. Reputation is valuable as it...

Institutions are important for proper economic performance, but are replaceable by trust or other social norms. We show that when proper institutions and trust are missing, integrity of the individuals can replace them. We construct a model of a transactions-based economy with contracts...

In this paper, an indirect evolutionary version of the game of trust is studied. A population consisting of trustworthy and exploitive players is assumed. Players are chosen randomly from the population and are matched with either strangers or players they know in order to play the game of...

Two signaling games of monetary policy are considered: game one examines the effect of hysteresis on the labor market on the results of the repeated monetary policy game. Disciplinary effects of reputation disappear in presence of hysteresis. The second game compares weifare effects of monetary...