TY - JOUR
T1 - Optimal accommodation by strong policymakers under incomplete information
AU - Cukierman, Alex
AU - Liviatan, Nissan
N1 - Funding Information:
*A previous version of the paper was presented at the meeting of the Society for Economic Dynamics and Control, Minneapolis, Minnesota, June 28-30, 1990. We wish to thank without implicating an anonymous referee and participants in seminars at Princeton’s macro seminar, the game theory seminar at Tel-Aviv University, and the Center for Advanced Studies seminar at the Hebrew University. Financial assistance from the Foerder Institute for Economic Research and the Horowitz Institute Project on Central Banking is gratefully acknowledged.
PY - 1991/2
Y1 - 1991/2
N2 - This paper examines the optimal behavior of a policymaker who is able to precommit (labelled 'strong') when the public entertains the possibility that he is either strong or weak (unable to precommit). The main result is that, in the presence of doubts about their type, it is optimal, even for strong policymakers, to partially accommodate inflationary expectations. This contrasts with Vickers (1986) who finds that when strength is conceived in terms of the relative concern for employment the strong policymaker inflates less under incomplete than under full information. The paper also provides a theory of endogenous announcements.
AB - This paper examines the optimal behavior of a policymaker who is able to precommit (labelled 'strong') when the public entertains the possibility that he is either strong or weak (unable to precommit). The main result is that, in the presence of doubts about their type, it is optimal, even for strong policymakers, to partially accommodate inflationary expectations. This contrasts with Vickers (1986) who finds that when strength is conceived in terms of the relative concern for employment the strong policymaker inflates less under incomplete than under full information. The paper also provides a theory of endogenous announcements.
UR - http://www.scopus.com/inward/record.url?scp=0001977621&partnerID=8YFLogxK
U2 - 10.1016/0304-3932(91)90006-A
DO - 10.1016/0304-3932(91)90006-A
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AN - SCOPUS:0001977621
SN - 0304-3932
VL - 27
SP - 99
EP - 127
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
IS - 1
ER -