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| Author: | Garfinkel, M.R. Seonghwan, O. |
| Title: | Strategic Discipline in monetary policy with private information: optimal targeting horizons. |
| Journal: | American Economic Review
1993 : MAR, VOL. 83:1, p. 99-117 |
| Index terms: | MONETARY POLICY TIME DISCIPLINE |
| Language: | eng |
| Abstract: | A multiperiod monetary targeting procedure is analyzed as a possible resolution to the credibility problem in policy when the monetary authority has some private information. By limiting the degree of flexibility permitted in policy, this procedure mitigates the credibility problem. As the length of the targeting horizon decreases, the severity of the credibility problem falls, but at the expense of weakening the monetary authority's ability to pursue its stabilization goals. Based on model simulations, the analysis studies the determinants of the optimal targeting horizon that balances the benefits of flexibility and discipline in policy. |
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