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Efficiency and Speculation in a Model with Price-Contingent Contracts

Lars E. O. Svensson
Econometrica 1981 49(1), 131
[This paper emphasizes the importance of endogenous (price) uncertainty as distinct from the standard exogenous uncertainty about the state of the world. Markets where agents can enter into forward contracts contingent upon future spot prices are studied with respect to existence of equilibrium, occurrence of speculation, and efficiency.]

Time Consistency of Fiscal and Monetary Policy: A Solution

Mats Persson; Torsten Persson; Lars E. O. Svensson
Econometrica 2006 74(1), 193-212 open access
This paper demonstrates how time consistency of the Ramsey policy -the optimal fiscal and monetary policy under commitment -can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite a general Ramsey policy, including timevarying polices with positive inflation and positive nominal interest rates.

Time Consistency of Fiscal and Monetary Policy

Mats Persson; Torsten Persson; Lars E. O. Svensson
Econometrica 1987 55(6), 1419 open access
This paper demonstrates how time consistency of the Ramsey policy–the optimal fiscal and monetary policy under commitment–can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite general Ramsey policies, including timevarying polices with positive inflation and positive nominal interest rates. We compare our results with