Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83040
Authors: 
Alexius, Annika
Year of Publication: 
1998
Series/Report no.: 
Sveriges Riksbank Working Paper Series 64
Abstract: 
Continuos credibility effects are incorporated into a simple model of optimal monetary policy. The resulting model provides explanations for a number of folk theorems about credibility in monetary policy. A central bank with low initial credibility pursues a more restrictive policy than a central bank with high initial credibility. It accommodates shocks less and expected inflation more. The higher initial credibility is, the larger is the scope for stabilisation of shocks. Calibrations show that the time consistent inflation rate is drastically reduced when the central bank takes credibility into account.
Subjects: 
Monetary policy
credibility
JEL: 
E52
E58
Document Type: 
Working Paper

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