If a central bank followed a rule for monetary policy,the time-inconsistency problem would be eliminated.

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If a central bank follows a clear rule for monetary policy, it becomes more predictable and credible, which reduces the time-inconsistency problem. By committing to a well-defined rule, the central bank can signal its commitment to low inflation or stable economic growth, which helps to anchor the expectations of households and firms. However, even under a rule-based system, there may be situations where the central bank may face conflicting objectives or unexpected shocks, which require a degree of discretion and flexibility. Therefore, while a rule-based system can be helpful in reducing the time-inconsistency problem, it is not a panacea for all challenges in monetary policy.

If a Central Bank Followed a Rule for Monetary Policy,the