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dc.contributor.authorBrendon, C.
dc.contributor.authorEllison, M.
dc.date.accessioned2018-04-06T13:28:42Z
dc.date.available2018-04-06T13:28:42Z
dc.date.issued2018-01-26
dc.identifier.otherCWPE1809
dc.identifier.urihttps://www.repository.cam.ac.uk/handle/1810/274651
dc.description.abstractThis paper proposes and characterises a new normative solution concept for Kydland and Prescott problems, allowing for a commitment device. A policy choice is dominated if either (a) an alternative exists that is superior to it in a time-consistent subdomain of the constraint set, or (b) an alternative exists that Paretodominates it over time. Policies may be time-consistently undominated where time-consistent optimality is not possible. We derive necessary and sufficient conditions for this to be true, and show that these are equivalent to a straightforward but significant change to the first-order conditions that apply under Ramsey policy. Time-consistently undominated policies are an order of magnitude simpler than Ramsey choice, whilst retaining normative appeal. This is illustrated across a range of examples.
dc.relation.ispartofseriesCambridge Working Papers in Economics
dc.rightsAll Rights Reserveden
dc.rights.urihttps://www.rioxx.net/licenses/all-rights-reserved/en
dc.subjectTime Consistency
dc.subjectUndominated Policy
dc.subjectRamsey Policy
dc.titleTime-Consistently Undominated Policies
dc.typeWorking Paper
dc.publisher.institutionUniversity of Cambridge
dc.publisher.departmentFaculty of Economics
dc.identifier.doi10.17863/CAM.21784


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