Time-Consistent Monetary Policy in an Indexed Economy

概要

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The celebrated analysis by Barro and Gordon (1983) of the undesirably high average rate of inflation that results under discretion illustrates the suboptimal nature of time-consistent monetary policy. That is to say, a discretionary policymaker may choose the positive rate of inflation with no output gain. The resulting rate of inflation depends upon the slope of the short-run Phillips curve, which in turn depends on the structure of the economy. We explore a model in which indexed wage contracts coexist with non-indexed long-term wage contracts which are assumed to incorporate non-contingent wage increases that permit adjustment of wage rates to anticipated inflation. In our model the slope of the long-run Phillips curve is not exogenous but to some extent depends upon monetary policy. Unlike the model of Barro and Gordon, positive steady-state inflation raises the steadystate output gap in this model. This is because we allow for the possibility that the monetary authority takes advantage of the inertial behavior of price implied by partially indexed wage contracts. In order to analyze time consistent monetary policy in the model considered here, we define a discretionary policy regime as one in which the monetary authority chooses the optimum feedback rule given the public's expectations of feedback money supply rule.
大阪府立大学の論文
2006-03-31