We 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 rationality conditions for the government and for private agent3. We provide a complete characterization of the sustainable equilibrium outcomes for a variant of Fischer's (1980) model of capital taxation. We also relate our work to recent developments in the theory of repeated games.
- Sustainable plans and mututal default / V. V. Chari, Patrick J. Kehoe.
- New sustainable plans / V. V. Chari, Patrick J. Kehoe.
- Sustainable plans and debt / V. V. Chari, Patrick J. Kehoe.
- Federal Reserve Bank of Minneapolis. Research Department
- Federal Reserve Bank of Minneapolis
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