Loan Commitments and Optimal Monetary Policy

Previously circulated under the title “Optimal Monetary Policy in an Economy with Sequential Service. ” The ideas developed here have been considerably refined through years of discussion with Ben Eden and Bob Lucas, neither of whom, however, can be held responsible for the form they have ultimately taken. I would also like to thank Dennis Carlton, Peter Diamond, Mark Gertler, Donald Morgan, Julio Rotemberg, Alberto Trejos, Steve Williamson and an anonymous referee for helpful comments, the Institut d’An&lisi Econbmica (Barcelona) for its hospitality while I wrote the firs