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Dynamic Inconsistency In The Public Supply Of Liquidity

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  • TAIZO MOTONISHI

Abstract

This paper analyses the optimal control of government securities. The special role of government securities under aggregate macroeconomic shocks results from the government's ability to collect taxes. Liquidity is loosened by an increase in the supply of government securities. The policy‐maker, however, faces a trade‐off between an ex ante incentive for entrepreneurs to expend effort and an ex post efficient utilization of investment opportunities.

Suggested Citation

  • Taizo Motonishi, 2004. "Dynamic Inconsistency In The Public Supply Of Liquidity," The Japanese Economic Review, Japanese Economic Association, vol. 55(4), pages 401-417, December.
    • Handle: RePEc:bla:jecrev:v:55:y:2004:i:4:p:401-417
    DOI: 10.1111/j.1468-5876.2004.00313.x
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    Cited by:

    1. Takahashi, Taiki, 2007. "A comparison of intertemporal choices for oneself versus someone else based on Tsallis’ statistics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 385(2), pages 637-644.

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