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Recent Perspectives in and on Macroeconomics

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  • Benjamin M. Friedman
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    Abstract

    The experience of costly disinflation in the early 1980s has contradicted the central policy promise of the new classical macroeconomics just as sharply as the experience of accelerating inflation in the l970s contradicted the chief promise of earlier thinking. Much of the attractive appeal of each approach rested on its holding out the prospect of successfully dealing with the foremost macroeconomic policy issue of its time -unemployment in the earlier case, and inflation more recently -without incurring the costs that previous thinking associated with effective solutions. Inflation did accelerate in the 1970s, however, and now the real economic costs of disinflation have proved remarkably in line with conventional estimates antedating the new classical macroeconomics. The implication of this unfortunate outcome is not, of course, simply to return to earlier approaches,but to retain what is theoretically appealing about the methodology of the new classical macroeconomics i a form that does not lead to falsified policy conclusions.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1208.

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    Date of creation: Sep 1983
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    Publication status: published as Friedman, Benjamin M. "Recent Perspectives in and on Macroeconomics." Issues in Contemporary Macroeconomics and Distribution, edited by George R. Feiwel, pp. 270-286. London: Macmillan Publishing,1985.
    Handle: RePEc:nbr:nberwo:1208

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    1. Friedman, Benjamin M., 1979. "Optimal expectations and the extreme information assumptions of `rational expectations' macromodels," Journal of Monetary Economics, Elsevier, Elsevier, vol. 5(1), pages 23-41, January.
    2. repec:nbr:nberre:0126 is not listed on IDEAS
    3. Gordon, Robert J., 1976. "Recent developments in the theory of inflation and unemployment," Journal of Monetary Economics, Elsevier, Elsevier, vol. 2(2), pages 185-219, April.
    4. Siegel, Jeremy J, 1982. "Monetary Stabilization and the Informational Value of Monetary Aggregates," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(1), pages 176-80, February.
    5. Lucas, Robert E, Jr, 1981. "Tobin and Monetarism: A Review Article," Journal of Economic Literature, American Economic Association, vol. 19(2), pages 558-67, June.
    6. Simon, Herbert A., 1978. "Rational Decision-Making in Business Organizations," Nobel Prize in Economics documents, Nobel Prize Committee 1978-1, Nobel Prize Committee.
    7. Sidrauski, Miguel, 1969. "Rational Choice and Patterns of Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 77(4), pages 575-85, Part II, .
    8. Weiss, Laurence M, 1980. "The Role for Active Monetary Policy in a Rational Expectations Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(2), pages 221-33, April.
    9. Taylor, John B, 1975. "Monetary Policy during a Transition to Rational Expectations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(5), pages 1009-21, October.
    10. Robert E. Lucas, Jr. & Thomas J. Sargent, 1979. "After Keynesian macroeconomics," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Spr.
    11. Phelps, Edmund S & Taylor, John B, 1977. "Stabilizing Powers of Monetary Policy under Rational Expectations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(1), pages 163-90, February.
    12. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(1), pages 1-23, February.
    13. Robert J. Gordon, 1975. "The Impact of Aggregate Demand on Prices," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(3), pages 613-670.
    14. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 85(1), pages 191-205, February.
    15. Okun, Arthur M, 1978. "Efficient Disinflationary Policies," American Economic Review, American Economic Association, American Economic Association, vol. 68(2), pages 348-52, May.
    16. Shiller, Robert J., 1978. "Rational expectations and the dynamic structure of macroeconomic models : A critical review," Journal of Monetary Economics, Elsevier, Elsevier, vol. 4(1), pages 1-44, January.
    17. Thomas J. Sargent, 1982. "Beyond demand and supply curves in macroeconomics," Staff Report, Federal Reserve Bank of Minneapolis 77, Federal Reserve Bank of Minneapolis.
    18. Lucas, Robert E, Jr, 1980. "Methods and Problems in Business Cycle Theory," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 12(4), pages 696-715, November.
    19. Grossman, Sanford & Weiss, Laurence, 1983. "A Transactions-Based Model of the Monetary Transmission Mechanism," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 871-80, December.
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    Cited by:
    1. William R. Kerr & William F. Lincoln, 2010. "The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention," NBER Working Papers 15768, National Bureau of Economic Research, Inc.
    2. Bennett T. McCallum, 1984. "Credibility and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, pages 105-135.
    3. Aizenman, Joshua & Marion, Nancy, 2011. "Using inflation to erode the US public debt," Journal of Macroeconomics, Elsevier, Elsevier, vol. 33(4), pages 524-541.

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