ABSTRACT
The traditional perspective on credibility follows the new classical position on the “rules vs. discretion” debate. i.e., it is argued that credibility is obtained if, and only if, the monetary authority is kept away from discretionary policies (“tied hands”). This, however, depends on the hypothesis of the new classical doctrine and may not be valid in models that open the possibility of multiple equilibria. This paper tries to discuss the question of credibility under the lights of the post-Keynesian model, offering an alternative to the mainstream view about this theme.
KEYWORDS:
Monetary policy; post-Keynesianism; credibility