Type
Working paper
Titre
Credibility and Monetary Policy
Auteur(s)
BARTHÉLEMY Jean - Banque de France (Auteur)
MENGUS Eric - HEC Paris - Recherche - Hors Laboratoire (Auteur)
Éditeur
Paris : Département d'économie de Sciences Po
Collection
Sciences Po Economics Discussion Papers : 2017-01
Résumé
EN
This paper revisits the ability of central banks to manage private sector's expectations depending on its credibility and how this affects the use of interest rate rules and pegs to achieve monetary policy objectives. When private agents can only provide limited incentives for the central bank to follow a policy, we show that resulting limited credibility allows a central bank to prevents the inflation from diverging by defaulting on past promises if necessary. As a result, the Taylor rule, when expected, anchors inflation expectations on a unique equilibrium path as long as the Taylor principle is satisfied. Finally, we also show that limited credibility restricts the impact of long-term interest rate pegs, so as to make current conditions less dependent on future policy changes.
CITATION BIBLIOGRAPHIQUE
EXPORT