What is meant by the time inconsistency of economic policy? Why might policymakers be tempted to renege

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What is meant by the “time inconsistency” of economic policy? Why might policymakers be tempted to renege on an announcement they made earlier? In this situation, what is the advantage of a policy rule?

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Macroeconomics

ISBN: 978-1464168505

5th Canadian Edition

Authors: N. Gregory Mankiw, William M. Scarth

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Question Posted: Dec 31, 2015 01:39 AM

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What is meant by the time inconsistency of economic policy? Why might policymakers be tempted to renege

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The problem of time inconsistency arises because expectations of future policies affect how people a...View the full answer

Macroeconomics

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