How severe is the time-inconsistency problem in monetary policy?

Stefania Albanesi, Varadarajan Chari and Lawrence Christiano

Quarterly Review, 2003, vol. 27, issue Sum, 17-33

Abstract: This study analyzes two monetary economies, a cash-credit good model and a limited-participation model. In these models, monetary policy is made by a benevolent policymaker who cannot commit to future policies. The study defines and analyzes Markov equilibrium in these economies and shows that there is no time-inconsistency problem for a wide range of parameter values.

Keywords: Monetary policy; Inflation (Finance); Money supply (search for similar items in EconPapers)
Date: 2003
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Working Paper: How Severe is the Time Inconsistency Problem in Monetary Policy? (2001)
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