The Rational Expectations Revolution: A Review Article of: Preston J. Miller, ed.:The Rational Expectations Revolution, Readings from the Front Line
AbstractThis review article of Preston Miller's The Rational Expectations Revolution, Readings From the Front Line focuses on the impact of this research on macroeconomic policymaking. Although policymakers have generally not accepted the equilibrium business cycle models advocated in many of the articles in the Miller volume and even continue to use traditional Keynesian macroeconometric models for policy analysis, several of the lessons from the rational expectations revolution have become central in thinking about policymaking. Policymakers now recognize the importance of expectations and credibility to the outcomes of particular policies. This means that they are more cautious in their use of econometric models and are less likely to advocate discretionary activist stabilization policies. They are also more willing to design policymaking to avoid the time-inconsistency problem and take a long rather than a short-run view, thereby avoiding myopic policies that produce undesirable outcomes.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5043.
Date of creation: Feb 1995
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Publication status: published as Journal of International and Comparative Economics, 5, 1996. Forthcoming.
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- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
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