Abstract
We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) with the non-reoptimization probability of can be interpretable as outcomes of deeper optimal policy under sustainable plans (Chari and Kehoe, 1990) with -period punishment. In a standard monetary-policy framework, we show that, for any sufficiently high value of , there exists an integer such that impulse responses to the cost-push shock under each policy are similar to each other.
Original language | English |
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Pages (from-to) | 22-25 |
Journal | Economics Letters |
Volume | 174 |
DOIs | |
Publication status | Published - 2019 |