Díaz-Giménez, Javier; Giovannetti, Giorgia; Marimon, Ramon - C.E.P.R. Discussion Papers - 2007
We characterize the optimal sequential choice of monetary policy in economies with either nominal or indexed debt. In a model where nominal debt is the only source of time inconsistency, the Markov-perfect equilibrium policy implies the progressive depletion of the outstanding stock of debt,...