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

VL - 20

SP - 1797

EP - 1800

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

SN - 0165-1889

IS - 9-10

ER -