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Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model

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  • Olivier J. Blanchard
  • Jeffrey Sachs

Abstract

This paper presents an intertemporal disequilibrium model with rational expectations, i.e. a model in which agents anticipate the future rationally, but in which prices and wages may not adjust fast enough to maintain continuous market clearing. Therefore, optimizing firms and households base their intertemporal plans on anticipations of both future quantity constraints and future prices. Such a model shows clearly that the effect of a policy depends not only on its current values but its anticipated path, After a presentation of the model and its basic dynamics, we therefore consider the effects of various paths of fiscal policy on the economy.

Suggested Citation

  • Olivier J. Blanchard & Jeffrey Sachs, 1982. "Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model," NBER Working Papers 0971, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0971 Note: EFG
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    References listed on IDEAS

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    1. Abel, Andrew B & Blanchard, Olivier J, 1983. "An Intertemporal Model of Saving and Investment," Econometrica, Econometric Society, vol. 51(3), pages 675-692, May.
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    Cited by:

    1. Rama, Martin, 1990. "Empirical investment equations in developing countries," Policy Research Working Paper Series 563, The World Bank.
    2. Rankin, Neil & Scalera, Domenico, 1995. "Death and the Keynesian multiplier," Ricerche Economiche, Elsevier, vol. 49(1), pages 75-87, March.
    3. van de Klundert, Th. & Peters, P., 1986. "Tax incidence in a model with perfect foresight of agents and rationing in markets," Journal of Public Economics, Elsevier, pages 37-59.
    4. van de Klundert, T.C.M.J., 1986. "Economic resilience : a two-country analysis," Other publications TiSEM 4043a5d9-a677-4744-94e7-1, Tilburg University, School of Economics and Management.
    5. Feltenstein, Andrew & Morris, Stephen, 1988. "Fiscal stabilization and exchange rate instability," Policy Research Working Paper Series 74, The World Bank.
    6. van Gemert, H.G. & de Groof, R.J. & Peer, H.W.G.M. & van Schaik, A.B.T.M., 1989. "Theo van de Klundert : A frontier economist," Other publications TiSEM 60b4aaf0-9730-4829-961a-9, Tilburg University, School of Economics and Management.
    7. Cuthbertson, K. & Gasparro, D., 1995. "Fixed investment decisions in UK manufacturing: The importance of Tobin's Q, output and debt," European Economic Review, Elsevier, vol. 39(5), pages 919-941, May.
    8. van der Ploeg, F., 1987. "Rationing in open economy and dynamic macroeconomics : A survey," Research Memorandum fd411b51-f487-4dde-a0e9-6, Tilburg University, School of Economics and Management.

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