The name is absent

A: Price rigidity

B: Discretion dominates timeless

к

D: Discretion dominates timeless

Fig. 2

Figure 2A reveals that, ceteris paribus, discretion does better than timeless perspective
policymaking when к is small and the Phillips curve is relatively flat. Low values for к can
arise when prices adjust infrequently and/or when strategic complementarities are important.
When the Phillips curve is relatively flat, monetary policy must generate large movements in
the output gap to stabilize inflation, and, relative to discretion, these large movements in the
output gap undermine the performance of the timeless perspective policy. Similarly, ceteris
paribus, Figure 2C shows that discretion does better than timeless perspective policymaking
when μ is large. Complementing these findings, Figure 2B shows that, while the share of
the parameter space for which discretion dominates the timeless perspective is decreasing in
к, there appears to be a threshold value for к above which timeless perspective policymaking
always dominates. Figure 2D reveals that the share of the parameter space for which dis-
16

<<   15   16   17   18   19   20   21   >>

More intriguing information