A NOTE ON RULES VERSUS DISCRETION DEBATE IN THE CONDUCT OF MONETARY POLICY

Year 1996, Volume: 14 Issue: 1, 63 - 70, 31.07.1996

Erdinç Telatar

Abstract

This paper, using straightforward calculusr
analyzes the relevance of commitment
in monetary policy. Lucas supply function has played a central role in the
rules versus discretion debate. A generalized representation of Lucas supply
function is presented, in order to investigate
the role of supply function in the debate. Specifically, if both unanticipated
and anticipated inflation rates affect the real output the relevance of
commitment in the debate depends on the coefficients of the supply
function.

Keywords

Monetary policy, Commitment, Supply function, Inflation, Policy debate

References

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