Time Inconsistency Problem in Monetary Policy?

A paper by Stefania Albanesi, V.V. Chari and Lawrence J. Christiano titled "How Severe is the Time Inconsistency Problem in Monetary Policy?"


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

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