Central bank reputation, cheap talk and transparency as substitutes for commitment: Experimental evidence

• 成果类型: Article
• 署名作者: Duffy, John; Heinemann, Frank
• 署名单位: University of California System; University of California Irvine; Technical University of Berlin
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2020.06.006
• 发表日期: 2021
• 关键词: Monetary policy; time inconsistency; repeated games; Central banking; COMMITMENT; DISCRETION; cheap talk; TRANSPARENCY; Experimental economics

摘要

We implement a repeated version of the Barro-Gordon monetary policy game in the laboratory and ask whether reputation serves as a substitute for commitment, enabling the central bank to achieve the efficient Ramsey equilibrium and avoid the inefficient, time-inconsistent one-shot Nash equilibrium. We find that reputation is a poor substitute for commitment. We then explore whether central bank cheap talk, policy transparency, both cheap talk and policy transparency, economic transparency or committees of central bankers yield improvements in the direction of the Ramsey equilibrium under the discretionary policy regime. Our findings suggest that these mechanisms have only small or transitory effects on welfare. Surprisingly, the real effects of supply shocks are better mitigated by a commitment regime than by any discretionary policy. Thus, we find that there is no trade-off between flexibility and credibility. (C) 2020 Elsevier B.V. All rights reserved.