Fig. 3
The optimal monetary policy rule. The optimal persistence parameter \(a_{t}^{j}\) (left panel) and the optimal impact coefficient \(\hat {h}_{t}^{j}\) in the policy rules for both simulation j={a,b} with ρu=0.95. Simulation a (dashed lines) assumes central bank credibilities \(\{\gamma _{t}^{a}\}_{t=0}^{T+1}=\{1,1,1,0\}\) and simulation b (solid lines) assumes central bank credibilities \(\{\gamma _{t}^{b}\}_{t=0}^{T+1}=\{1,1,0,0\}\)