Thus, by establishing a transparent and credible commitment to a specific numerical objective, monetary policy can  5  Barro and Gordon (1983) first described the time-inconsistency problem as it applied to monetary policy.
Not only were the output costs of disinflation seen to be high but also the monetary policy needed to bring inflation down was consistently miscalculated – economists during the 1970s persistently overestimated both the speed and magnitude of the slowdown in real activity and inflation that would result from a given rise in the federal funds rate.