, not only because it must be serviced, but also because it creates a time inconsistency problem that distorts interest …

the time inconsistency problem of monetary policy. However, policy can react to unexpected shocks only with a time lag … the time inconsistency problem dominates. In contrast, standard pegs, that can be left at short notice, are more credible …: monetary policy, currency board, standard peg, credibility, time inconsistency problem, stochastic purchasing power parity …

with which policy interacts and its implications for optimal policy and time inconsistency. Capital stock endogeneity makes …