Reputation Effects as a Source of Dynamically Unstable Monetary and Fiscal Policies
1983-10
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Reputation Effects as a Source of Dynamically Unstable Monetary and Fiscal Policies
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1983-10
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Center for Economic Research, Department of Economics, University of Minnesota
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Working Paper
Abstract
Independent monetary and fiscal policymakers choose between two settings
of their single policy variable and have preferences defined over
the four resulting outcomes. With incomplete information about each
other's preferences, maintaining one value for his policy variable provides
credibility for the policymaker and his policy. The incentive for
having a credible policy is that it provides the authority with the
opportunity to attain his most preferred policy mix. However, when both
pursue these benefits, the dynamically unstable policy mix occurs.
Since neither wish this to continue, one authority always acquiesces to
the wishes of the other.
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Discussion Paper
188
188
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Loewy, M.B., (1983), "Reputation Effects as a Source of Dynamically Unstable Monetary and Fiscal Policies", Discussion Paper No. 188, Center for Economic Research, Department of Economics, University of Minnesota.
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Loewy, Michael B.. (1983). Reputation Effects as a Source of Dynamically Unstable Monetary and Fiscal Policies. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55280.
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