On the Time Consistency of Optimal Plans

Jose Encarnacion

No 198503, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: This paper shows that the Kydland and Prescott argument for rules versus discretion -- to the effect that optimal policies are time inconsistent -- is invalid, points out that the Pollak approach does not solve the time inconsistency problem as originally formulated by Strotz, and indicates the simple solution within the Strotz framework.

Date: 1985-03
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Published as UPSE Discussion Paper No. 1985-03, March 1985

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Persistent link: https://EconPapers.repec.org/RePEc:phs:dpaper:198503

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