This paper presents a a simple model that complements the standard result that nominal rigidity generates lack of credibility for monetary policy . Here credibility problems arise for fiscal policy in the presence of real rigidities: these cause the policy not to counteract deflationary real shocks, as it would had the government been able to pre-commit itself. It is the lack of credibility when information is complete, not the attempt to establish a reputation, when information is incomplete, that is here responsible for a sub-optimal policy response.
Fiscal policy in Europe: The credibility implications of real wage rigidity
Manasse Paolo Luciano Adalberto.
1991
Abstract
This paper presents a a simple model that complements the standard result that nominal rigidity generates lack of credibility for monetary policy . Here credibility problems arise for fiscal policy in the presence of real rigidities: these cause the policy not to counteract deflationary real shocks, as it would had the government been able to pre-commit itself. It is the lack of credibility when information is complete, not the attempt to establish a reputation, when information is incomplete, that is here responsible for a sub-optimal policy response.File in questo prodotto:
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