Time-Inconsistency, Democracy, and Optimal Contingent Rules
AbstractIn a stochastic world there appears to be a trade-off between the necessary 'tying of hands' to conquer the effects of time-inconsistency and the desirability of flexible response. However, it is in principle possible for the electorate to achieve an optimal outcome by use of discriminatory electoral punishment, provided it has access to all relevant macro data prior to the election. Alternatively, it could punish an independent central bank mandated to pursue this outcome (but impotent without such a mandate): this has advantages in information and flexibility and allows elections to concentrate on nonconsensual issues. Copyright 1995 by Royal Economic Society.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 47 (1995)
Issue (Month): 2 (April)
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Other versions of this item:
- Minford, Patrick, 1993. "Time-inconsistency, Democracy and Optimal Contingent Rules," CEPR Discussion Papers 767, C.E.P.R. Discussion Papers.
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
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- Herrendorf, Berthold, 1998. "Inflation Targeting as a Way of Precommitment," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 431-48, July.
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