A Keynesian Approach to the Credibility of Monetary Policy

Vol. 20 No. 4 (2000)

Oct-Dec / 2000
Published October 1, 2000
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Libânio, Gilberto de Assis. 2000. “A Keynesian Approach to the Credibility of Monetary Policy”. Brazilian Journal of Political Economy 20 (4):431-45. https://doi.org/10.1590/0101-31572000-1487.

A Keynesian Approach to the Credibility of Monetary Policy

Gilberto de Assis Libânio
Professor do Departamento de Economia da Faculdade de Ciências Econômicas da Universidade Federal de Minas Gerais – FACE/UFMG
Brazilian Journal of Political Economy, Vol. 20 No. 4 (2000), Oct-Dec / 2000, Pages 431-445

Abstract

The traditional perspective on credibility follows the new classical position on the
“rules vs. discretion” debate. i.e., it is argued that credibility is obtained if, and only if, the
monetary authority is kept away from discretionary policies (“tied hands”). This, however,
depends on the hypothesis of the new classical doctrine and may not be valid in models that
open the possibility of multiple equilibria. This paper tries to discuss the question of credibility
under the lights of the post-Keynesian model, offering an alternative to the mainstream
view about this theme.

JEL Classification: E52; E58.


Keywords: Monetary policy post-Keynesianism credibility