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Economic policy as expectations management: Keynes’ and Friedman's complementary approaches

Author

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  • Sylvie Rivot

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

We investigate how Keynes and Friedman, respectively, address the issue of the disequilibria at stake in a monetary economy through a shared concern for the formation of expectations. We show that Keynes was interested in the coordination of long-term expectations regarding non-monetary assets prospective yields, while Friedman focused on the adaptation of short-term nominal expectations. Regarding the remedies to these disequilibria, both economists called for devices that aim to stabilise market expectations. As a direct outcome, Keynes designed policies that aim to stabilise the long-term state of expectations while Friedman basically aimed at the acceleration of the competitive adjustment process.

Suggested Citation

  • Sylvie Rivot, 2017. "Economic policy as expectations management: Keynes’ and Friedman's complementary approaches," Post-Print hal-04014346, HAL.
    • Handle: RePEc:hal:journl:hal-04014346
    DOI: 10.1080/09672567.2017.1323939
    as

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