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Reagan's Economic Policies: A Critique


  • Modigliani, Franco


The Reagan administration is credited with one major success: the reduction in inflation. But it was not achieved painlessly, through "monetarism" and "supply" policies. Money growth swung widely and disinflation required, as always, a high and protracted unemployment rate. The deep tax cuts failed to increase saving, but contributed to the largest deficits in U.S. peace time history, high interest rates , dollar overvaluation, loss of competitiveness, and rising foreign d ebt. Output grew weekly as unemployment was high through 1987 and productivity growth low. Nonetheless, real per capita disposable income grew substantially, but thanks to the tax reductions and gains in terms of trade which are destined to reverse. Copyright 1988 by Royal Economic Society.

Suggested Citation

  • Modigliani, Franco, 1988. "Reagan's Economic Policies: A Critique," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 397-426, September.
  • Handle: RePEc:oup:oxecpp:v:40:y:1988:i:3:p:397-426

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    References listed on IDEAS

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    5. Bovenberg, A Lans & Broer, D Peter & Westerhout, Ed W M T, 1993. "Public Pensions and Declining Fertility in a Small Open Economy: An Intertemporal Equilibrium Approach," Public Finance = Finances publiques, , vol. 48(Supplemen), pages 43-59.
    6. Calvo, Guillermo A & Obstfeld, Maurice, 1988. "Optimal Time-Consistent Fiscal Policy with Finite Lifetimes," Econometrica, Econometric Society, vol. 56(2), pages 411-432, March.
    7. B. Douglas Bernheim, 1989. "Intergenerational Altruism, Dynastic Equilibria and Social Welfare," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 119-128.
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    9. David M. Cutler & James M. Poterba & Louise M. Sheiner & Lawrence H. Summers, 1990. "An Aging Society: Opportunity or Challenge?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 1-74.
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    Cited by:

    1. Magazzino, Cosimo, 2010. "The Economic Policy of Ronald Reagan. Between Supply-Side and Keynesianism," MPRA Paper 25537, University Library of Munich, Germany.
    2. Gunther Schnabl, 2001. "Weak Economy and Strong Currency: The Origins of the Strong Yen in the 1990s," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(4), pages 489-503.
    3. Keith M. Carlson, 1989. "Federal budget trends and the 1981 Reagan economic plan," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 18-31.
    4. Adrian W. Throop, 1989. "Reagan fiscal policy and the dollar," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 18-26.

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