Lack of commitment in monetary policy leads to the well known Barro-Gordon inflation bias. In this paper, we argue that two phenomena associated with the time inconsistency problem have been overlooked in the exchange rate debate. We show that, absent commitment, independent monetary policy can...

We analyze the implications of the time inconsistency problem for the Turkish monetary policy in the last two decades. After deriving the restrictions that the Barro and Gordon model imposes on a time series model for inflation and output, we show that the time inconsistency problem can explain...

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...

We study the effects of nominal debt on the optimal sequential choice of monetary policy. When the stock of debt is nominal, the incentive to generate unanticipated inflation increases the cost of the outstanding debt even if no unanticipated inflation episodes occur in equilibrium. Without full...

The literature on time-inconsistent preferences introduced sophisticated, naive and partially naive types of agents that represent different levels of awareness of their time inconsistency. This paper incorporates time-inconsistent players in a sequential bargaining model. Under the complete...

We ananlyze general equilibrium effects of hyperbolic discounting among unemployed workers in search equilibrium. We show that hyperbolic discounting changes the workers' trade-off between high wages and a high exit rate from unemployment, thus influencing the behavior of firms. More...