The Rational expectations revolution : readings from the front line /

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Bibliographic Details
Imprint:Cambridge, Mass. : MIT Press, c1994.
Description:xvii, 512 p. : ill. ; 24 cm.
Language:English
Subject:Rational expectations (Economic theory)
Macroeconomics
Macroeconomics.
Rational expectations (Economic theory)
Format: Print Book
URL for this record:http://pi.lib.uchicago.edu/1001/cat/bib/1563922
Hidden Bibliographic Details
Other authors / contributors:Miller, Preston J.
ISBN:0262132974
0262631555 (pbk.)
Notes:Includes bibliographical references and index.
Also available on the internet.
Table of Contents:
  • Contributors
  • Acknowledgments
  • Introduction
  • I. The Rational Expectations Approach to Macroeconomic Policymaking
  • After Keynesian Macroeconmics
  • Macroeconometric Models
  • Keynesian Macroeconometrics
  • Failure of Keynesian Macroeconometrics
  • Equilibrium Business Cycle Theory
  • Criticism of Equilibrium Theory
  • Cleared Markets
  • Persistence
  • Linearity
  • Stationary Models and the Neglect of Learning
  • Summary and Conclusions
  • Notes
  • Rational Expectations and the Reconstruction of Macroeconomics
  • Models Must Let Behavior Change with the Rules of the Game
  • The Investment Decision as an Example
  • General Implications
  • Policymakers Must Choose Among Alternative Rules, Not Isolated Actions
  • Notes
  • Time Consistency and Optimal Policy Design
  • The Capital Taxation Model
  • A Single-Period Version
  • With Commitment
  • Without Commitment
  • Multiperiod Versions
  • With Commitment
  • Without Commitment
  • Some Implications
  • The Debt and Default Model
  • The Role of Public Debt
  • The Economy
  • With Commitment
  • Without Commitment
  • Some Implications
  • The Policy Implications Summarized
  • Appendix A. More About the Capital Taxation Model
  • Appendix B. Computing Ramsey Policies for the Debt and Default Model
  • Notes
  • II. Monetary and Budget Policy Analysis in Closed Economies
  • A Legal Restrictions Theory of the Demand for ''Money'' and the Role of Monetary Policy
  • Legal Restrictions and the Coexistence of High- and Low-Return Assets
  • Legal Restrictions and Monetary Policy
  • Why Impose Legal Restrictions?
  • Concluding Remarks
  • Notes
  • Some of the Choices for Monetary Policy
  • The Model
  • The People
  • The Government
  • Equilibrium
  • Nonbinding Stationary Equilibrium
  • Binding Stationary Equilibrium
  • A Simple Special Case: Fixed Saving
  • Concluding Remarks
  • Notes
  • Some Unpleasant Monetarist Arithmetic
  • Tighter Money Now Can Mean Higher Inflation Eventually
  • Tighter Money Now Can Mean Higher Inflation Now
  • Concluding Remarks
  • Appendix A. An Overlapping Generations Model That Generates Our Assumptions
  • Appendix B. A Model in Which Tighter Money Now Can Cause Higher Inflation Now
  • Appendix C. Sufficient Conditions for Tighter Money Now to Cause Higher Inflation Now
  • Notes
  • Some Pleasant Monetarist Arithmetic
  • Pleasant Arithmetic Reverses a Key Sargent-Wallace Assumption
  • An Example
  • Empirical Evidence Favors the Pleasant Arithmetic
  • Differences About the Relevant Real Yield
  • Real Yields Versus Real Growth
  • A Possible Reconciliation
  • Conclusion
  • Notes
  • A Reply to Darby
  • Background
  • Darby's Evidence
  • Is Darby's Evidence Sufficient?
  • More Is Involved
  • A Model That Shows Darby's Evidence Isn't Sufficient
  • Two Cases
  • Which Arithmetic Best Applies Currently?
  • Notes
  • Intergenerational Linkages and Government Budget Policies
  • A Model without Intergenerational Linkages
  • Policy Effects
  • An Increase in Social Security
  • An Increase in Government Debt
  • Adding Intergenerational Linkages
  • Parent to Child
  • Child to Parent
  • Other Considerations
  • Neutrality and Economic Efficiency
  • Some Qualifications and Extensions
  • Conclusion
  • Notes
  • Playing by the Rules: A Proposal for Federal Budget Reform
  • The Need for Policy Rules
  • The Problems with the Old Rules
  • The Gramm-Rudman-Hollings Process
  • The Fall 1990 Reforms
  • The Case for Our Rules
  • Basic Principles
  • Our Reforms in More Detail
  • What Our Reforms Will Accomplish
  • Objections to Our Reforms
  • Transition
  • Our Rules Are No Panacea
  • Suggested Readings
  • On Political Economy
  • On Agency Theories of the Firm
  • On Recent Budget Policy
  • On Last Fall's Reforms
  • On Proposed Reforms
  • Acknowledgments
  • III. Monetary and Budget Policy Analysis in Open Economies
  • Why Markets in Foreign Exchange Are Different from Other Markets
  • Postulates: The Nature of Fiat Currencies
  • Supplies of Fiat Currencies
  • Demands for Fiat Currencies
  • Indeterminacy Under Laissez-Faire Floating Rates
  • Non-Laissez-Faire Floating Rate Systems
  • Policy Options in a World of Many Fiat Currencies
  • Notes
  • International Coordination of Macroeconomic Policies: A Welfare Analysis
  • A Preview of the Study
  • The Model
  • A Defense of the Model
  • Implications for Policy Coordination
  • The Model
  • A Typical Country
  • Private Demands and Supplies
  • Government Policy
  • World Equilibrium
  • A Special Case
  • The Effects of a Policy Change: The Model's Predictions vs. Recent Events
  • Tighter U.S. Monetary Policy
  • Easier U.S. Budget Policy with Monetary Accommodation...
  • ... And without Monetary Accommodation
  • Choosing Monetary Policies: Cooperation vs. Noncooperation
  • Conclusion
  • Appendix A. Proofs of Propositions 1-3
  • Appendix B. Expressions for the Effects of One Country's Policy Changes
  • Appendix C. Proof of Proposition 4 and Derivation of the Model's Trade-offs
  • Proof of Proposition 4
  • Cooperative and Noncooperative Trade-offs
  • Notes
  • A Case for Fixing Exchange Rates
  • What's Wrong with Floating Exchange Rates?
  • Initially Appealing ...
  • ... Eventually Disappointing
  • Are Fixed Exchange Rates Better?
  • In Theory Yes ...
  • ... And Yes in Practice
  • What Should Be Done?
  • Notes
  • Suggested Readings
  • IV. Business Cycle Analysis
  • Note
  • Theory Ahead of Business Cycle Measurement
  • The Business Cycle Phenomena
  • The Growth Model
  • Using Data to Restrict the Growth Model
  • The Nature of the Technological Change
  • The Statistical Behavior of the Growth Models
  • The Basic Growth Model
  • The Kydland-Prescott Economy
  • The Hansen Indivisible Labor Economy
  • Empirical Labor Elasticity
  • Extensions
  • Summary and Policy Implications
  • Notes
  • Some Skeptical Observations on Real Business Cycle Theory
  • Are the Parameters Right?
  • Where Are the Shocks?
  • What About Prices? ...
  • ... And Exchange Failures?
  • Conclusion
  • Note
  • Response to a Skeptic
  • Miscellaneous Misfires
  • Prices
  • Technology Shocks
  • My Claims
  • Measurement Issues
  • Real Interest Rate
  • Preferences
  • Technology
  • Uncertainty
  • Labor Hoarding
  • To Conclude
  • Business Cycles: Real Facts and a Monetary Myth
  • Alternative Views of Business Cycles
  • Mitchell's Four Phases
  • Frisch's Pendulum
  • Slutzky's Random Shocks
  • Advancing to Lucas' Deviations
  • Modem Business Cycle Theory
  • Business Cycle Deviations Redefined
  • Business Cycle Facts and Regularities
  • Real Facts
  • Production Inputs
  • Output Components
  • Factor Incomes
  • Nominal Facts
  • Monetary Aggregates
  • Price Level
  • Concluding Remarks
  • Notes
  • The Labor Market in Real Business Cycle Theory
  • The Facts
  • The Standard Model
  • Nonseparable Leisure
  • Indivisible Labor
  • Government Spending
  • Home Production
  • Conclusion
  • Notes
  • Economic Fluctuations without Shocks to Fundamentals
  • Or, Does the Stock Market Dance to Its Own ...
  • A Stock Price Model
  • People, Preferences, and Prices
  • Periodic and Bizarre Paths
  • Animal Spirits and Hemlines
  • Summary
  • Policy Implications
  • A Model of Frictional Unemployment
  • An Island Economy
  • Equilibria
  • Policy Implications
  • Conclusion
  • Appendix: More About the Models
  • The Stock Price Model
  • Consumer Choices and Equilibrium
  • Output and the Stock Price
  • Parameter Values and Simulation Method
  • Solving the Hemline Example
  • The Tax/Subsidy Policy
  • The Frictional Unemployment Model
  • Notes
  • V. Empirical Macroeconomics
  • Why Is Consumption Less Volatile Than Income?
  • The Equilibrium Growth Model
  • An Informal Look at the Multiagent Economy
  • A Formal Look at the Robinson Crusoe Economy
  • Technology
  • Preferences
  • Model Solution
  • The Permanent Income Model
  • The Model and an Approximate Solution
  • A Formula for the Consumption/Income Relationship
  • The Importance of the Dynamic Properties of Labor Income
  • Some Simple Examples
  • The Real World
  • The Deaton Paradox . . . ?
  • Deaton's Results
  • Trend Model
  • A Questionable Resolution
  • The Implausible Trend Model
  • The Unreliable Difference Model
  • The Real Business Cycle Alternative
  • The Model
  • Partial Success
  • The Essential Difference. . .
  • . . . And a Surprising Similarity
  • Appendix: The U.S. Data Used in the Models
  • A Feel for the Numbers
  • Notes
  • Modeling the Liquidity Effect of a Money Shock
  • The Model Economies
  • Similarities and Differences
  • Cash Flow
  • Timing
  • A Closer Look
  • Households
  • Firms
  • Financial Intermediaries
  • Shocks and Equilibrium
  • Solving the Basic Cash-in-Advance Model
  • Employment Decisions
  • Households
  • Firms
  • Saving/Investment Decisions
  • Households
  • Firms
  • Money Demand
  • Looking for a Dominant Liquidity Effect: Qualitatively . . .
  • In the Basic Model
  • A Temporary Money Shock
  • A Persistent Money Shock
  • In Two Modified Models
  • With Sluggish Household Saving
  • Also with Sluggish Firm Investment
  • ... And Quantitatively
  • Parameter Values
  • Utility and Technology
  • Shocks
  • The Effects of a Money Shock
  • Looking at Oilier Model Implications
  • Volatility
  • Correlations with Output
  • Summary and Directions for Further Research
  • Appendix: Finding Approximate Solutions to the Models
  • An Undetermined Coefficient Method
  • Applying the Undetermined Coefficient Method
  • The Fuerst-Lucas Model
  • The Other Cash-in-Advance Models
  • Notes
  • References
  • Index