Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209970
Authors: 
Debortoli, Davide
Maih, Junior
Nunes, Ricardo
Year of Publication: 
2010
Series/Report no.: 
Working Paper No. 2010/25
Publisher: 
Norges Bank, Oslo
Abstract: 
This paper proposes a method and a toolkit for solving optimal policy with imperfect commitment in linear quadratic models. As opposed to the existing literature, our method can be employed in medium- and large-scale models typically used in monetary policy. We apply our method to the Smets and Wouters (2007) model, where we show that imperfect commitment has relevant implications for the interest rate setting, the sources of business cycle fluctuations, and welfare.
Subjects: 
commitment
discretion
linear-quadratic
JEL: 
C32
E58
E61
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-582-3
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no
Document Type: 
Working Paper
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