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.

JEL Classification: E52; E58.