Abstract
Recent monetary history has been characterized by monetary authorities which have been, alternatively hard and soft on inflation. In a vintage capital framework, investment decisions are not easily reversed. Therefore, expectations of policy as well as current policy are important to the investment decision. Here, a vintage capital model is used to assess the value of central bank credibility for a policy change. Policy in this model is assumed to be private information of the central banker. Agents learn about that policy which to study the ensuing transitional dynamics following a change in monetary policy regime.
Recommended Citation
Stiver, John D., "Expectations, and Credibility in a Model of Monetary Policy" (2003). Economics Working Papers. 200334.
https://digitalcommons.lib.uconn.edu/econ_wpapers/200334