The Time Inconsistency of Monetary Policy with Inflation Persistence.
In a monetary policy model incorporating partial persistence in inflation it is shown that inflation bias is reduced and the response to shocks improved if the policy maker has a discount rate lower than its true social value. Thus a patient central banker is shown to be a third mechanism for offset...
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2000
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| _version_ | 1797053450666639360 |
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| author | Mash, R |
| author_facet | Mash, R |
| author_sort | Mash, R |
| collection | OXFORD |
| description | In a monetary policy model incorporating partial persistence in inflation it is shown that inflation bias is reduced and the response to shocks improved if the policy maker has a discount rate lower than its true social value. Thus a patient central banker is shown to be a third mechanism for offsetting time inconsistency problems in addition to Rogoff's conservative central banker and the principal-agent approach of Walsh. The paper also analyses outcomes under the latter regimes and the optimal rule, finding important differences from the results of earlier literature that excludes inflation persistence. |
| first_indexed | 2024-03-06T18:43:55Z |
| format | Working paper |
| id | oxford-uuid:0dd7e123-c6de-4857-80d2-c9fc71461288 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T18:43:55Z |
| publishDate | 2000 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:0dd7e123-c6de-4857-80d2-c9fc714612882022-03-26T09:42:39ZThe Time Inconsistency of Monetary Policy with Inflation Persistence.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:0dd7e123-c6de-4857-80d2-c9fc71461288EnglishOxford University Research Archive - ValetDepartment of Economics (University of Oxford)2000Mash, RIn a monetary policy model incorporating partial persistence in inflation it is shown that inflation bias is reduced and the response to shocks improved if the policy maker has a discount rate lower than its true social value. Thus a patient central banker is shown to be a third mechanism for offsetting time inconsistency problems in addition to Rogoff's conservative central banker and the principal-agent approach of Walsh. The paper also analyses outcomes under the latter regimes and the optimal rule, finding important differences from the results of earlier literature that excludes inflation persistence. |
| spellingShingle | Mash, R The Time Inconsistency of Monetary Policy with Inflation Persistence. |
| title | The Time Inconsistency of Monetary Policy with Inflation Persistence. |
| title_full | The Time Inconsistency of Monetary Policy with Inflation Persistence. |
| title_fullStr | The Time Inconsistency of Monetary Policy with Inflation Persistence. |
| title_full_unstemmed | The Time Inconsistency of Monetary Policy with Inflation Persistence. |
| title_short | The Time Inconsistency of Monetary Policy with Inflation Persistence. |
| title_sort | time inconsistency of monetary policy with inflation persistence |
| work_keys_str_mv | AT mashr thetimeinconsistencyofmonetarypolicywithinflationpersistence AT mashr timeinconsistencyofmonetarypolicywithinflationpersistence |