Abstract:The evolution of research on monetary policy over the past two decades has been dramatic. The 1980's through the mid-1990's were dominated by work building on the insights of Kydland and Prescott, employing the notion of dynamic consistency to offer a theory of monetary policy, one in which discretionary policy by central banks led to socially costly inflation. Researchers studied the nature of the time inconsistency of monetary policy and developed solutions, ranging from appointing conservatives, to developi… Show more
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