The Econometric SocietyEdited by: Marina Halac • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: Nov, 1987, Volume 55, Issue 6
https://www.jstor.org/stable/1913564
p. 1419-1431
Lars E. O. Svensson, Mats Persson, Torsten Persson
The problem of time inconsistency arises from two different sources. First, as shown by Calvo (1978), there is an incentive for each government to engage in an initial unanticipated inflation. Second, as discussed by Lucas and Stokey (1983), there is an incentive for each government to deviate from the path of taxes announced by the preceding government. In this paper it is shown that these two sources of time inconsistency can be removed by a particular method of debt management, involving both nominal and indexed government bonds of various maturities.
December 11, 2025
We are deeply saddened by the passing of Kate Ho, the John L. Weinberg Professor of Economics and Business Policy at Princeton University and a Fellow of the Econometric Society. Kate was a brilliant IO economist and scholar whose impact on the profession will resonate for many years to come.
