Econometrica Vol. 52 No. 6 1984
Dynamic Inconsistency, Rational Expectations, and Optimal Government Policy
Abstract
[The consensus in the literature is that the use of only lump-sum taxation is a necessary and sufficient condition for the dynamic consistency of optimal open-loop government policies. We show that this does not hold for models with nonhomogeneous agents. Then the stated condition is neither necessary nor sufficient. Dynamic inconsistency arises because of a shortage of appropriate government policy instruments which amounts to the consensus condition only in special cases.]
- DOI
- 10.2307/1913514
- Volume
- 52
- Issue
- 6
- Pages
- 1437
- Sources
- bibtex:phds-export.bib crossref openalex