Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82578
Authors: 
Basso, Henrique S.
Year of Publication: 
2008
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2008:15
Abstract: 
This paper analyzes the effectiveness of delegation in solving the time inconsistency problem of monetary policy using a microfounded general equilibrium model where delegation and reappointment are explicitly included into the government's strategy. The method of Chari and Kehoe (1990) is applied to characterize the entire set of sustainable outcomes. Countering McCallum's (1995) second fallacy, delegation is able to eliminate the time inconsistency problem, with the commitment policy being sustained under discretion for any intertemporal discount rate.
Subjects: 
Central Bank
Monetary Policy
Institutional Design
JEL: 
E52
E58
E61
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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