LOOSE COMMITMENT IN MEDIUM-SCALE MACROECONOMIC MODELS: THEORY AND APPLICATIONS

Davide Debortoli, Junior Maih, Ricardo Nunes
<span title="2012-08-30">2012</span> <i title="Cambridge University Press (CUP)"> <a target="_blank" rel="noopener" href="https://fatcat.wiki/container/eqd2lr4k3vh2rlxamdoqozw7ly" style="color: black;">Macroeconomic Dynamics</a> </i> &nbsp;
This paper proposes a method and a toolkit for solving optimal policy with imperfect commitment. As opposed to the existing literature, our method can be employed in medium-and large-scale models typically used in monetary policy. We apply our method to the Smets and Wouters (2007) model, where we show that imperfect commitment has relevant implications for interest rate setting, the sources of business cycle fluctuations, and welfare.
<span class="external-identifiers"> <a target="_blank" rel="external noopener noreferrer" href="https://doi.org/10.1017/s1365100512000326">doi:10.1017/s1365100512000326</a> <a target="_blank" rel="external noopener" href="https://fatcat.wiki/release/clfyocotizg3vna6oxcovgctl4">fatcat:clfyocotizg3vna6oxcovgctl4</a> </span>
<a target="_blank" rel="noopener" href="https://web.archive.org/web/20190428151658/https://www.federalreserve.gov/pubs/ifdp/2011/1034/ifdp1034.pdf" title="fulltext PDF download" data-goatcounter-click="serp-fulltext" data-goatcounter-title="serp-fulltext"> <button class="ui simple right pointing dropdown compact black labeled icon button serp-button"> <i class="icon ia-icon"></i> Web Archive [PDF] <div class="menu fulltext-thumbnail"> <img src="https://blobs.fatcat.wiki/thumbnail/pdf/02/54/02541e21ea7073300e223bc0f6461ffa018d5190.180px.jpg" alt="fulltext thumbnail" loading="lazy"> </div> </button> </a> <a target="_blank" rel="external noopener noreferrer" href="https://doi.org/10.1017/s1365100512000326"> <button class="ui left aligned compact blue labeled icon button serp-button"> <i class="external alternate icon"></i> cambridge.org </button> </a>