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Sustainable Plans

Author

Listed:
  • Chari, V V
  • Kehoe, Patrick J

Abstract

The authors propose a definition of time-consistent policy for infinite-horizon economies with competitive private agents. Allocations and policies are defined as functions of the history of past policies. A sustainable equilibrium is a sequence of history-contingent policies and allocations that satisfy certain sequential optimality conditions for the government and for private agents. The authors provide a complete characterization of the sustainable equilibrium outcomes for a variant of Stanley Fischer's model of capital taxation. They also relate their work to recent developments in the theory of repeated games. Copyright 1990 by University of Chicago Press.

Suggested Citation

  • Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August.
    • Handle: RePEc:ucp:jpolec:v:98:y:1990:i:4:p:783-802
    DOI: 10.1086/261706
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    References listed on IDEAS

    as
    1. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
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    3. Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-1428, November.
    4. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
    5. K. Brunner & A. Meltzer, "undated". "Reputational Constraints on Monetary Policy," Working Paper 33690, Harvard University OpenScholar.
    6. Rogoff, Kenneth, 1987. "Reputational constraints on monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 26(1), pages 141-181, January.
    7. Green, Edward J., 1980. "Noncooperative price taking in large dynamic markets," Journal of Economic Theory, Elsevier, vol. 22(2), pages 155-182, April.
    8. Chari V. V. & Kehoe Patrick J., 1993. "Sustainable Plans and Debt," Journal of Economic Theory, Elsevier, vol. 61(2), pages 230-261, December.
    9. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
    10. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-538, June.
    11. Drew Fudenberg & Jean Tirole, 1988. "Perfect Bayesian and Sequential Equilibria: A Clarifying Note," Working papers 496, Massachusetts Institute of Technology (MIT), Department of Economics.
    12. Brunner, Karl & Meltzer, Allan H., 1987. "Bubbles and other essays," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 26(1), pages 1-8, January.
    13. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
    14. James W. Friedman, 1973. "A Non-cooperative Equilibrium for Supergames: A Correction," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 435-435.
    15. V. V. Chari & Patrick J. Kehoe & Edward C. Prescott, 1988. "Time consistency and policy," Staff Report 115, Federal Reserve Bank of Minneapolis.
    16. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
    17. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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