Loewy, Michael B.2009-11-242009-11-241983-10Loewy, 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.https://hdl.handle.net/11299/55280Independent 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.en-USWorking Paper