We investigate conditions under which a government facing a large set of small private agents can implement its desired outcome when it has only a limited commitment ability to policy actions. We show that, in static contexts, more commitment ability always improves equilibrium outcomes and, in...

The commitment ability of governments is neither infinite nor zero but intermediate. In this paper, we determine the commitment ability that a government needs to implement a unique equilibrium outcome and rule out self-fulfilling expectations. We show that, in a large class of static...

The Federal Reserve's muddled mandate to attain simultaneously the incompatible goals of maximum employment and price stability invites short-term-oriented discretionary policymaking inconsistent with the systematic approach needed for monetary policy to contribute best to the economy over time....

Would a more open and regular evaluation of the monetary policy framework improve policy in the United States? Even when considering a relatively short timeframe that spans the 1960s to the present, it is possible to point to many significant changes to the framework. Some of the changes were...

This paper examines the policy experience of the Fed, ECB and BOJ during and after the Covid-19 pandemic and draws lessons for monetary policy strategy and its communication. All three central banks provided appropriate accommodation during the pandemic but two failed to unwind this...

Discretionary policymakers cannot manage private-sector expectations and cannot coordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. To utilize the explanatory power of models with multiple...

The combination of discretionary monetary policy, labor-market distortions and nominal wage rigidity yields an inflation bias as monetary policy tries to exploit nominal wage contracts to address labour-market distortions Although an inflation target eliminates this inflation bias, it creates a...

Available evidence supports the view that growth is faster in more open economies. In order to analyze the implications of openness and growth on determinacy and learnability of worldwide rational expectations equilibria we develop a two-country New Keynesian model with growth. We analyze these...

This paper studies monetary policy rules in a small open economy with Inflation Targeting, incomplete pass-through and rigid nominal wages. The paper shows that, when nominal wages are fully flexible and pass-through is low to moderate, the monetary authority should target the consumer price...