Monetary Policy Credibility and Coordination

In assessing the appropriate stance of monetary policy, one cannot just rely on the simulated effects of policy in econometric models. In the real world the impact of a given policy change will depend heavily on the state of expectations and the degree of confidence in the monetary authorities. In this regard, Section I of this paper considers some fundamental issues related to the credibility of non-inflationary policies that have received much attention in the recent analytical literature on economic policy. Section II discusses briefly the extent to which the efficacy of monetary policy could be enhanced through international cooperation. More details on these topics can be found in the literature review presented in Section III.