Optimal Degree of Commitment in a Tax Policy
In analyzing economic policies, a severe problem is the time-inconsistency problem. In this regard, the choice of commitment vs. discretion engenders a tradeoff of flexibility and credibility. Therefore, it might be necessary and acceptable to adopt a discretionary policy to some degree, but past studies do not clarify the degree to which a government exercises such a discretionary option. This paper clarifies the optimal degree of commitment using the framework of a repeated game reported by Chari and Kehoe (1990). We point out the relation between the optimal degree of commitment and the rate of time preference.
|Date of creation:||Mar 2011|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.osaka-u.ac.jp/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Manuel Amador & Iván Werning & George-Marios Angeletos, 2006.
"Commitment vs. Flexibility,"
Econometric Society, vol. 74(2), pages 365-396, 03.
- Manuel Amador & Ivan Werning & George-Marios Angeletos, 2003. "Commitment Vs. Flexibility," NBER Working Papers 10151, National Bureau of Economic Research, Inc.
- Manuel Amador & George-Marios Angeletos & Ivan Werning, 2004. "Commitment vs. Flexibility," 2004 Meeting Papers 87, Society for Economic Dynamics.
- Reis, Catarina, 2006.
"Taxation without Commitment,"
2071, University Library of Munich, Germany.
- Christopher Phelan & Ennio Stacchetti, 1999.
"Sequential equilibria in a Ramsey tax model,"
258, Federal Reserve Bank of Minneapolis.
- Kurozumi, Takushi, 2008. "Optimal sustainable monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1277-1289, October.
- Stefania Albanesi & Christopher Sleet, 2004.
"Dynamic optimal taxation with private information,"
Discussion Paper / Institute for Empirical Macroeconomics
140, Federal Reserve Bank of Minneapolis.
- In-Koo Cho & Akihiko Matsui, 2005. "Time Consistency In Alternating-Move Policy Games," The Japanese Economic Review, Japanese Economic Association, vol. 56(3), pages 273-294.
- Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
- Anderson Schneider & Facundo Piguillem, 2009. "Heterogeneous Beliefs and Optimal Taxation," 2009 Meeting Papers 826, Society for Economic Dynamics.
When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:1111. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Atsuko SUZUKI)
If references are entirely missing, you can add them using this form.