How Severe is the Time Inconsistency Problem in Monetary Policy?
NBER Working Paper No. 8139
We analyze two monetary economies - a cash-credit good model and a limited participation model. In our models, monetary policy is made by a benevolent policymaker who cannot commit to future policies. We define and analyze Markov equilibrium in these economies. We show that there is no time inconsistency problem for a wide range of parameter values.
Document Object Identifier (DOI): 10.3386/w8139
Published: Albanesi, Stefania, V. V. Chari and Lawrence J. Christiano. "How Severe Is The Time-Inconsistency Problem In Monetary Policy?," FRB Minneapolis - Quarterly Review, 2003, v27(3,Summer), 17-33. citation courtesy of
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