This paper provides a resolution of the non-uniqueness of reputational equilibria in the Barro-Gordon monetary policy game. We introduce a `chisel-proof' credibility condition which ensures that in response to a small deviation from the low inflation rate by the central bank, it never pays for...

We consider a dynamic model of price regulation with asymmetric information where strategic delegation is available to the regulator. Firms can sink non- contractible, cost-reducing investment but regulators cannot commit to future price levels. We fully characterize the Perfect Bayesian...

In this paper, we develop a North-South endogenous growth model to examine three phases of development in the South: imitation of Northern products; imitation and innovation; and finally, innovation only. In particular, the model has the features of catching up (and potentially overtaking),...

This paper explores the relationship between the myopia, the solvency and the reputation of a government choosing the optimal financing policy given a particular path of government spending. A central result is the demonstration of a logical link between government myopia and insolvency in the...

This Paper examines a general problem exemplified by post-auction (third generation ‘3G’) mobile telecommunications markets and by recent developments in the UK market for postal services. When entering these (or any other) markets, firms must often decide on the degree of coverage...

Delegation to independent bodies whose preference can be different from those of the government has been shown to have beneficial commitment benefits in areas as widely diverse as monetary policy and trade. This paper addresses the case for delegation in the context of a cost-reimbursement...

The paper emphasizes the distinction between the purely fiscal reasons for fiscal policy coordination under EMU (given a credible low-inflation policy by the ECB), and the spillover effects of an uncoordinated fiscal policy on monetary policy. The worst scenario is where an independent ECB sets...

This paper re-examines the issue of the credibility and sustainability of optimal policies derived from Pontryagin's Maximum Principle and generally regarded as time-inconsistent, in models with forward-looking rational expectations. Specifically, it considers the behaviour of such models in the...

This paper examines the conduct of monetary policy in an economy with overlapping multi-period nominal wage contracts. We examine the welfare implications of stabilization policy in the face of random supply shocks. In the absence of precommitment, the discretionary policy can be improved by...

The effect of asymmetric information on monetary policy is investigated in the context of an overlapping wage contract model. Optimal rules with and without precommitment under full information are compared with the optimal rule without precommitment (i.e. the discretionary rule) under...