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Expectations, and Credibility in a Model of Monetary Policy

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  • John D. Stiver

    (University of Connecticut)

Abstract

Recent monetary history has been characterized by monetary authorities which have been, alternatively hard and soft on inflation. In a vintage capital framework, investment decisions are not easily reversed. Therefore, expectations of policy as well as current policy are important to the investment decision. Here, a vintage capital model is used to assess the value of central bank credibility for a policy change. Policy in this model is assumed to be private information of the central banker. Agents learn about that policy which to study the ensuing transitional dynamics following a change in monetary policy regime.

Suggested Citation

  • John D. Stiver, 2003. "Expectations, and Credibility in a Model of Monetary Policy," Working papers 2003-34, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2003-34
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    References listed on IDEAS

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    Cited by:

    1. Eyal Argov & David Rose & Mr. Philippe D Karam & Mr. Natan P. Epstein & Mr. Douglas Laxton, 2007. "Endogenous Monetary Policy Credibility in a Small Macro Model of Israel," IMF Working Papers 2007/207, International Monetary Fund.

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