Triple time-inconsistent policies

Triple time-inconsistent policies: "Guillermo Calvo, 31 August 2009

This column introduces 'triple time-inconsistent' episodes. First, a public institution is expected to cave in and offer a bailout to prevent a crisis. Then, in an attempt to regain credibility, it pulls back. Finally, it resumes bailing out the survivors of the wreckage caused by the policy surprise. This column characterises the 1998 Russian crisis and the current crisis as triple time-inconsistency episodes and says that a financial crisis may simply be a bad time to try to build credibility.

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