Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93582
Authors: 
Natividad-Carlos, Fidelina B.
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, School of Economics, University of the Philippines 2013-07
Abstract: 
This paper provides the algebra and a panel diagram to attempt to examine the so-called inflation- unemployment (or Phillips curve, or aggregate supply) example, the most popular example in the literature when introducing the concept of time inconsistency or dynamic inconsistency. The resulting panel diagram (along with the derivations presented in the appendices) is used to analyze the different possible outcomes, depending on the scenarios - rule or pre-commitment, cheating, and equilibrium - and find out whether there is indeed time inconsistency or dynamic inconsistency in the said example.
Subjects: 
Philips curve
aggregate supply
time inconsistency
dynamic inconsistency
short-run optimal policy
long-run optimal policy
rational expectations
rules vs discretion
JEL: 
E31
E52
E61
Document Type: 
Working Paper

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