What is the relationship between rational expectations

Reference no: EM13897747

1. The time consistency of policy requires the speci?cation of a policy plan for the future, say for the next ?ve years, and the determination to stick to it. Under what conditions - and shocks - is this a desirable policy? When is it not desirable? Discuss.

2. Show that there can be an in?ationary bias in discretionary myopic policies.

3. What is the relationship between rational expectations and the credibility of monetary policy? What do they imply for the relevance of credibility to the success of an anti- in?ation program? What do they imply for the choice between a gradualist versus a cold-turkey approach to ?ghting in?ation? Discuss.

Reference no: EM13897747

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