Construct · 1 fields · 1 citations

time inconsistency of optimal policy: a standalone construct

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Macroeconomics

the problem that a policy optimal today ceases to be optimal later, so discretionary policymakers deviate unless bound by rules.

In macroeconomics, time inconsistency of optimal policy refers to the problem that a policy optimal today ceases to be optimal later, so discretionary policymakers deviate unless bound by rules. This meaning comes from Kydland (1977) in Journal of Political Economy.[1]

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policy2 fields · 4 citationsjingle · one word, two constructs

References

Kydland, F. E., & Prescott, E. C. (1977). Rules Rather than Discretion: The Inconsistency of Optimal Plans. Journal of Political Economy, 85(3), 473-491. https://doi.org/10.1086/260580

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