TY - JOUR
T1 - Note on 'Loss of Monetary Discretion in a Simple Dynamic Policy Game'
AU - Beetsma, Roel M. W. J.
AU - Bovenberg, A. Lans
AU - Jensen, Henrik
N1 - JEL classification: E52, E61, E63
PY - 1996
Y1 - 1996
N2 - Jensen (1994a) finds that loss of monetary discretion leads to lower welfare. However, by extending his model we show that if real base money holdings are relatively low, as is likely to be the case for modern economics, a zero-inflation rule may well be preferable to monetary discretion. If the emphasis on achieving the output and public spending targets falls, a zero-inflation rule is more likely to be preferred. The increased support for binding policy rules thus conforms with a less tolerant attitude towards inflation
AB - Jensen (1994a) finds that loss of monetary discretion leads to lower welfare. However, by extending his model we show that if real base money holdings are relatively low, as is likely to be the case for modern economics, a zero-inflation rule may well be preferable to monetary discretion. If the emphasis on achieving the output and public spending targets falls, a zero-inflation rule is more likely to be preferred. The increased support for binding policy rules thus conforms with a less tolerant attitude towards inflation
U2 - 10.1016/0165-1889(95)00921-3
DO - 10.1016/0165-1889(95)00921-3
M3 - Journal article
SN - 0165-1889
VL - 20
SP - 1797
EP - 1800
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - 9-10
ER -