The Roles of Monetary, Financial and Fiscal Policy with Rational Expectations / Willem H. Buiter.

By:

Buiter, Willem H

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0412.Publication details: Cambridge, Mass. National Bureau of Economic Research 1979.Description: 1 online resource: illustrations (black and white)Subject(s):

E - Macroeconomics and Monetary Economics

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: The setup of the paper is as follows: Section I presents a fairly standard, small deterministic macromodel with a number of classical features. All markets clear instantaneously, there is no money illusion, and perfect foresight rules. The effects of monetary, financial, and fiscal policies in this model are analyzed. A number of nonneutrality propositions are stated. The drawback of this model is that it is ad hoc in the sense that private behavioral relationships have not been derived from explicit optimizing behavior. Section II, therefore, summarizes the results of some studies on debt neutrality and monetary superneutrality in a "fully rational" overlapping generations model. This leads to the conclusion that the ad hoc model of Section I is not a bad parable for such fully rational models. Section III abandons the assumption of universal instantaneous Wairasian equilibrium and considers the consequences of price and wage stickiness for the scope for stabilization policy; stochastic models are analyzed here, which also permits the consideration of some of the interesting issues associated with incomplete information.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0412 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

November 1979.

The setup of the paper is as follows: Section I presents a fairly standard, small deterministic macromodel with a number of classical features. All markets clear instantaneously, there is no money illusion, and perfect foresight rules. The effects of monetary, financial, and fiscal policies in this model are analyzed. A number of nonneutrality propositions are stated. The drawback of this model is that it is ad hoc in the sense that private behavioral relationships have not been derived from explicit optimizing behavior. Section II, therefore, summarizes the results of some studies on debt neutrality and monetary superneutrality in a "fully rational" overlapping generations model. This leads to the conclusion that the ad hoc model of Section I is not a bad parable for such fully rational models. Section III abandons the assumption of universal instantaneous Wairasian equilibrium and considers the consequences of price and wage stickiness for the scope for stabilization policy; stochastic models are analyzed here, which also permits the consideration of some of the interesting issues associated with incomplete information.