0 a member of a government department, legislature, or other organization who is responsible for making new rules, laws, etc.:
This is so because a lower markup reduces the desire of the policymaker to inflate the economy and to boost demand.
The policymaker wants to avoid particularly bad outcomes, and therefore wants policy to be robust against specification errors that could have particularly severe consequences.
Although we could, in principle, allow for families of rules that involve learning on the part of the policymaker, we abstract from this issue here.
In line with the existing literature, we assume that he or she also knows the natural unemployment rate, the policymaker's preferences, the parameters characterizing eq.
The policymaker's willingness to resist also influences the first-period behavior of the speculators, who become less inclined to attack.
By assumption, the policymaker will never be able to revise his policy rule as a function of future shock realizations and initial conditions.
A policymaker working from the preferential best evidence principle might nonetheless adopt such a proxy-preferential doctrine.
Thus, since without commitment the policymaker cannot (credibly) deliver the optimal degree of smoothness, the gains from being able to commit increase as and increase.
