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 …

-looking. Specifically, optimal monetary policy under commitment is associated with a determinate REE that is stable under learning, whereas …

function under commitment. We consider two alternative specifications for the loss function. The first specification includes … we are faced with the time-inconsistency problem under commitment, we initialize our estimates by considering a presample …

degrees of credibility, in which commitment and discretion become special cases of what we call quasi commitment. The monetary … policy authority is assumed to formulate optimal commitment plans, to be tempted to renege on them, and to succumb to this … from commitment accrue at relatively low levels of credibility. In our benchmark calibration, a commitment expected to last …

modes of optimization, termed commitment and discretion. I estimate the model separately under each policy using maximum … commitment model but a more balanced concern relative to inflation and output stability in the discretionary model. …

two assumptions on the extent of government's intra-period commitment, which in turn define two notions of time … consistency of the Markov policy. Our results show that the extent of government's intra-period commitment has important …, different degrees of government's intra-period commitment. …

traps under limited commitment and identify the minimum degree of commitment which is needed to escape from these traps. We …

framework for monetary policy deliberations, some of the central themes will be the importance of commitment for a superior … characterizing a central bank's policy commitment. …

. Second, we show that the commitment (time inconsistent) solution does not normally involve zero inflation and output at its …, we show that the timeless perspective policy has the same steady state as the commitment case, but without any short …