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Macroeconomics After a Decade of Rational Expectations: Some Critical Issues

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  • Bennett T. McCallum

Abstract

The main section of this paper discusses competing theories of aggregate supply that are currently being utilized in macroeconomic models with rational expectations. The distinction between flexible-price equilibrium models and models with nominal contracts is emphasized and three models of the latter type are described and contrasted, it is argued that rejection of flexible-price equilibrium theories, as the evidence seems to warrant,does not require abandonment of the equilibrium approach. Also included are remarks on the present status of the rational expectations version of the natural-rate hypothesis. The second section of the paper briefly discusses a few issues concerning the equilibrium approach and aggregate demand, with attention devoted to the overlapping-generations framework. The third section considers a recent attempt, involving the use of "vector autoregression"models, to denigrate the importance of the Lucas critique of traditional policy-evaluation procedures.

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  • Bennett T. McCallum, 1982. "Macroeconomics After a Decade of Rational Expectations: Some Critical Issues," NBER Working Papers 1050, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1050
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    Cited by:

    1. Benjamin M. Friedman, 1983. "Money, credit, and Federal Reserve Policy : reply to Porter and Offenbacher," Economic Review, Federal Reserve Bank of Richmond, vol. 69(Nov), pages 30-33.
    2. Francisco Dakila, Jr., 2001. "Alternative Monetary Policy Rules for the Philippines," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 38(2), pages 1-36, December.
    3. Thomas B. Fomby & William C. Gruben & James G. Hoehn, 1984. "Some time series methods of forecasting the Texas economy," Working Papers 8402, Federal Reserve Bank of Dallas.
    4. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050, Elsevier.
    5. Gauger, Jean Ann, 1984. "Three essays on the neutrality of anticipated money growth," ISU General Staff Papers 198401010800008758, Iowa State University, Department of Economics.
    6. Andres, Javier & Lopez-Salido, J. David & Nelson, Edward, 2005. "Sticky-price models and the natural rate hypothesis," Journal of Monetary Economics, Elsevier, vol. 52(5), pages 1025-1053, July.
    7. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, January.
    8. Nicolas Cachanosky, 2015. "Expectation in Austrian business cycle theory: Market share matters," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 28(2), pages 151-165, June.
    9. Robert P. Flood & Robert J. Hodrick, 1985. "Optimal Price and Inventory Adjustment in an Open-Economy Model of the Business Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 887-914.
    10. Bennett T. McCallum, 1984. "Credibility and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 105-135.
    11. Haubrich, Joseph G & King, Robert G, 1991. "Sticky Prices, Money, and Business Fluctuations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 243-259, May.
    12. Bennett T. McCallum, 1988. "Real Business Cycle Models," NBER Working Papers 2480, National Bureau of Economic Research, Inc.
    13. John B. Taylor, 1983. "Rational Expectations Models in Macroeconomics," NBER Working Papers 1224, National Bureau of Economic Research, Inc.
    14. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.
    15. Tito Belchior Silva Moreira & Michel Constantino & George Henrique de Moura Cunha & Paulo Roberto Pires de Sousa & Luciano Balbino dos Santos, 2021. "The Business Cycle, Inflation, and Unemployment Rate Nexus: An Empirical Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(10), pages 110-110, September.

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