The dynamic inconsistency of a government's preferred policy, when it occurs, usually implies that the maximum level of welfare that can be delivered at some initial time can only be attained by constraining the economy to `low' levels in the future. In this paper, we set up a linear quadratic...

It has been recognized that the optimal strategy of a government is generally time-inconsistent: optimality requires that the government take into account expectations effects in the formulation of its policy and to ignore these effects when applying the policy. In order to analyse the problem,...

The authors study different solutions to a simple one-dimensional linear qua dratic game with a large number of private agents and a government. A "time-consistent" solution is defined as a solution to the Hamilton- Jacobi-Bellman equation, i.e., as a policy for which the government has no...

[eng] Theory and practice of french unemployment . . The paper shows that an economic policy which has stabilized wages around productivity growth will yield a randow walk behavior for employment. The sources of this indexation are examined. In the framework of the paper, it will resuit from the...

Against all odds, the euro turned out to be a weak currency. We argue that this outcome can readily be explained by the policy mix that was chosen at the onset of the period: tight fiscal policies following the convergence mechanism that was imposed by the Maastricht treaty and loose monetary...

The capital-output ratio is more than 40% lower in the poor countries than in the richest ones. Comparing TFP in manufacturing and in the economy at large, we show that the Balassa-Samuelson effect explains the bulk of this scarcity: TFP in manufacturing is indeed about 40% lower than TFP in the...

Commodity prices are usually very slow to recover from adverse shocks. This is one of the reasons why it has proven so difficult either to smooth their effect or to stabilize them, and why it is sometimes argued that they should behave as if shocks were permanent. There is no reason however why...