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008	190125s2018    onc    #o    f|0| 0 eng d
040	|aCaOODSP|beng
041	|aeng|bfre
043	|an-cn---
086	1 |aFB3-5/2018-61E-PDF
100	1 |aCateau, Gino.
245	10|aLimited commitment, endogenous credibility and the challenges of price-level targeting |h[electronic resource] / |cby Gino Cateau and Malik Shukayev.
260	|a[Ottawa] : |bBank of Canada, |c2018.
300	|aii, 24 p.
490	1 |aBank of Canada staff working paper, |x1701-9397 ; |v2018-61
500	|a"December 2018."
504	|aIncludes bibliographic references.
520	|a"This paper studies the cost of limited commitment when a central bank has the discretion to adjust policy whenever the costs of honoring its past commitments become high. Specifically, we consider a central bank that seeks to implement optimal policy in a New Keynesian model by committing to a price-level target path. However, the central bank retains the flexibility to reset the target path if the cost of adhering to it exceeds a social tolerance threshold. We find that endowing the central bank with such discretion undermines the credibility of the price-level target and weakens its effectiveness to stabilize the economy through expectations. The endogenous nature of credibility also brings novel results relative to models with exogenous timing of target resets. A much higher degree of credibility is needed to realize the stabilization benefits of commitment. Multiple equilibria also emerge, including a low credibility equilibrium with frequent target resets and high volatility"--Abstract.
546	|aIncludes abstract in French.
692	07|2gccst|aMonetary policy
692	07|2gccst|aCentral banks
700	1 |aShukayev, Malik.
710	2 |aBank of Canada.
830	#0|aStaff working paper (Bank of Canada)|x1701-9397 ; |v2018-61.|w(CaOODSP)9.806221
856	40|qPDF|s1.07 MB|uhttps://publications.gc.ca/collections/collection_2019/banque-bank-canada/FB3-5-2018-61-eng.pdf