Time-consistent implementation in macroeconomic games

Barthélemy, Jean and Eric Mengus
Authors registered in the RePEc Author Service: Jean Barthélemy

No 17120, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The commitment ability of governments is neither infinite nor zero but intermediate. In this paper, we determine the commitment ability that a government needs to implement a unique equilibrium outcome and rule out undesired self-fulfilling expectations. We first show that, in a large class of static macroeconomic games, the government can implement any time-consistent outcome with any low level of commitment ability. We then show that this result may not be robust to imperfect information, fixed costs or repeated interactions. We finally derive implications for models of bailouts, inflation bias, and capital taxation.

Keywords: Implementation; Limited commitment; Policy rules (search for similar items in EconPapers)
JEL-codes: C73 E58 E61 G28 (search for similar items in EconPapers)
Date: 2022-03
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Related works:
Journal Article: Time-consistent implementation in macroeconomic games (2024)
Working Paper: Time-Consistent Implementation in Macroeconomic Games (2022)
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