Time consistency, asymmetric information and monetary policy design: An overview

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper surveys the literature on monetary policy in the context of asymmetric information game theory. It distinguishes between the earlier literature focusing on finding reputational equilibria, the literature analyzing the possibilities of using announcements to influence expectations, and the principal-agent approach to the institutional design of monetary policy. The focus is on the institutional implications of the various studies. The conclusion is that institutional reforms directed at independent central banks with a mandate for price stability are not in line with the recommendations from the theory.
Original languageEnglish
Pages (from-to)445-472
JournalDe Economist
Volume144
Issue number3
DOIs
Publication statusPublished - Oct 1996
Externally publishedYes

Fingerprint

Asymmetric information
Information policy
Monetary policy
Time consistency
Policy design
Announcement
Mandate
Central bank
Institutional reform
Price stability
Institutional design
Game theory

Keywords

  • monetary policy
  • time-consistency
  • central bank independance
  • asymmetric information

Cite this

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Time consistency, asymmetric information and monetary policy design: An overview. / Prast, Henriette.

In: De Economist, Vol. 144, No. 3, 10.1996, p. 445-472.

Research output: Contribution to journalArticleScientificpeer-review

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