Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model / Olivier J. Blanchard, Jeffrey Sachs.

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Blanchard, Olivier J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0971.Publication details: Cambridge, Mass. National Bureau of Economic Research 1982.Description: 1 online resource: illustrations (black and white)Online resources:

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Abstract: This paper presents an intertemporal disequilibrium model with rational expectations, i.e. a model in which agents anticipate the future rationally, but in which prices and wages may not adjust fast enough to maintain continuous market clearing. Therefore, optimizing firms and households base their intertemporal plans on anticipations of both future quantity constraints and future prices. Such a model shows clearly that the effect of a policy depends not only on its current values but its anticipated path, After a presentation of the model and its basic dynamics, we therefore consider the effects of various paths of fiscal policy on the economy.

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Previous	nber w0968 An Extended Accelerator Model of R&D and Physical Investment /	nber w0969 The Welfare Cost of Social Security's Impact on Private Saving /	nber w0970 The Optimal Level of Social Security Benefits /	nber w0971 Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model /	nber w0972 A Theory of Expropriation and Deviations From Perfect Capital Mobility /	nber w0973 A Transactions Based Model of the Monetary Transmission Mechanism: Part 1 /	nber w0974 A Transactions Based Model of the Monetary Transmission Mechanism: Part 2 /	Next

August 1982.

This paper presents an intertemporal disequilibrium model with rational expectations, i.e. a model in which agents anticipate the future rationally, but in which prices and wages may not adjust fast enough to maintain continuous market clearing. Therefore, optimizing firms and households base their intertemporal plans on anticipations of both future quantity constraints and future prices. Such a model shows clearly that the effect of a policy depends not only on its current values but its anticipated path, After a presentation of the model and its basic dynamics, we therefore consider the effects of various paths of fiscal policy on the economy.