Monetary Policy and Time Inconsistency Pt I: The Phillips Curve for Output

This video begins the discussion of time inconsistency and monetary policy, and how the central bank may have incentives to announce low inflation today, and engage in higher inflation in the future, despite their initial promises. This lecture sets up the Phillips Curve for Output, and explains how, in this case, Aggregate Supply is the result of a signal extraction problem, leading to supply no longer being independent of inflation, as was observed in the Real Business Cycle Model.