 Time Inconsistency of Benevolent Government EconomiesStaff General Research Papers Archive from Iowa State University, Department of Economics Abstract: Why do government policymakers in open-ended dynamic economic models with period-by-period re-optimization tend to exhibit time inconsistency, in the sense that they systematically deviate in later periods from earlier planned policy paths? This article develops necessary and sufficient conditions for time consistency for a general class of dynamic Walrasian economies that includes many previous economic models (Brock, Calvo, Kydland-Prescott, Fischer, etc.) as special cases. It is shown that the time inconsistency of government policymakers can be explained in this class of models as the consequence of successive structural changes in the constraints faced by the government policymakers as private agents carry out decisions in each successive time period conditional on anticipated future government policy settings. Annotated pointers to related work can be accessed at: http://www2.econ.iastate.edu/tesfatsi/dehome.htm Keywords: time inconsistency; macroeconomic policy; benevolent government (search for similar items in EconPapers) Published in Journal of Public Economics 1986, vol. 31, pp. 25-52 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:11206 Access Statistics for this paper More papers in Staff General Research Papers Archive from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC. |
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