Athey, Susan; Atkeson, Andrew; Kehoe, Patrick J. - 2004 - Rev
inconsistency problem arising from the temptation to stimulate the economy with unexpected inflation. Although this dynamic … specifies the highest allowable inflation rate. The more severe the time inconsistency problem and the less important is private … information, the smaller is the optimal degree of discretion. As either the time inconsistency problem becomes sufficiently severe …