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- Title
TIME CONSISTENCY OF FISCAL AND MONETARY POLICY.
- Authors
Persson, Mats; Persson, Torsten; Svensson, Lars E. O.
- Abstract
The problem of time inconsistency arises from two different sources. First, as shown by Calvo (1978), there is an incentive for each government to engage in an initial unanticipated inflation. Second, as discussed by Lucas and Stokey (1983), there is an incentive for each government to deviate from the path of taxes announced by the preceding government. In this paper it is shown that these two sources of time inconsistency can be removed by a particular method of debt management, involving both nominal and indexed government bonds of various maturities.
- Subjects
PUBLIC finance; DEBT management; GOVERNMENT securities; FINANCIAL management; FISCAL policy; MONETARY policy; PRICE inflation; MATURITY (Finance)
- Publication
Econometrica, 1987, Vol 55, Issue 6, p1419
- ISSN
0012-9682
- Publication type
Article
- DOI
10.2307/1913564