The Rational expectations revolution : readings from the front line /
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Imprint: | Cambridge, Mass. : MIT Press, c1994. |
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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 |
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