rational expectations, stochastic coefficients and monetary stabilization policy

Snower, Dennis J. (July 1981) rational expectations, stochastic coefficients and monetary stabilization policy. Forschungsberichte / Research Memoranda 164

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summary: the paper examines the validity of the sargent-wallace proposition that systematic monetary policy is ineffective with regard to real economic variables whenever (a) economic agents have rational expectations, (b) national product depends on errors in price expectations, and (c) the model of the economy is linear. it is shown that this policy ineffectiveness proposition is not necessarily valid when the economic model contains multiplicative disturbances. given such disturbances, systematic monetary policy may become a useful stabilization policy device. in this vein, optimal money supply rules associated with various multiplicative disturbances are derived.;

Item Type: IHS Series
Status: Published
Date Deposited: 26 Sep 2014 10:34
Last Modified: 01 Apr 2016 14:07
URI: http://irihs.ihs.ac.at/id/eprint/164

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