How Severe is the Time Inconsistency Problem in Monetary Policy?

Stefania Albanesi (), Varadarajan Chari () and Lawrence Christiano ()

No 8139, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: E5 E61 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mon
Date: 2001-02
Note: EFG
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Journal Article: How severe is the time-inconsistency problem in monetary policy? (2003)
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