A NOTE ON RULES VERSUS DISCRETION DEBATE IN THE CONDUCT OF MONETARY POLICY

Özet

This paper, using straightforward calculusr analyzes the relevance of commitment in monetary policy. Lucas supply function has played a central role in the rules versus discretion debate. A generalized representation of Lucas supply function is presented, in order to investigate the role of supply function in the debate. Specifically, if both unanticipated and anticipated inflation rates affect the real output the relevance of commitment in the debate depends on the coefficients of the supply function.