We characterize Markov-perfect equilibria in a setting where the absence of government commitment affects the financing … over two consecutive periods in choosing taxes. We then use our framework to quantify the value of commitment, which we …

optimal monetary and fiscal policies under commitment and discretion. With symmetric rigidities, fiscal policy will not be … rates and the terms of trade. Under commitment, both monetary policy and relative spending are inertial, while this is not … the case under discretion. We conduct numerical analyses to assess the welfare gains from commitment and from having …

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 …

optimal commitment rule when the discounted sum of the weights the public’s policy-forecasting equation puts on past policy …

better explained as following optimal policy under discretion than under commitment. We estimate policy objectives of both …

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 …

We study the existence and uniqueness properties of monetary policy with limited commitment in LQ RE models. We use a … multiple equilibria under pure discretion, and under full commitment there are two distinct determinate regimes. We study how … these properties change over the continuum of intermediate cases between commitment and discretion. We find that although …