Monetary Policy without Commitment

Thu, 01 Jan 2026 00:00:00 +0000

Research question and motivation: Post-pandemic inflation across advanced economies rose to levels not seen since the early 1980s, reviving interest in central bank credibility. The standard quantitative macro models used to interpret this episode assume exogenous central bank reaction functions and inflation targets, which limits their usefulness. This paper instead makes monetary policy endogenous: a welfare-maximizing central bank that lacks the ability to commit re-optimizes every period. The goal is to characterize how lack of commitment shapes long-run inflation and transition dynamics, questions that prior credibility work (Barro-Gordon 1983; Rogoff 1985) could not address because it used static or log-linearized settings.

Pierre Yared | Macro Paper Warehouse

Monetary Policy without Commitment