| While a policymaker can achieve superior results by committing to a plan for all his future actions than by determining these in a discretionary manner, such plans are not time-consistent. In a sticky-price model for monetary policy analysis, the first essay discusses and compares two alternatives for improving upon discretionary policy. The first one suggests that the policymaker approach the policy problem from a timeless perspective and bind himself to a procedure for determining his future actions, instead of committing to a plan for the actions themselves. The second option is to introduce a delay between the publication and implementation of policy, forcing the policymaker to preannounce his actions. We show that policy with an implementation delay dominates a timeless perspective when the model of the policy problern is unchanged over time, but that a timeless approach can give better results when the model is subject to frequent structural changes. We conclude that these procedures can improve policymaking, and that they should be easier to implement than the ordinary commitment solution. |
