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Rational Expectations and Economic Policy

"Several areas in economics today have unprecedented significance and vitality. Most people would agree that stabilization policy ranks with the highest of these. Continuing inflation and periodic serious acceleration of inflation combined with high and secularly rising unemployment combine to give the area high priority. This book brings us up to date on an extremely lively discussion involving the role of expectations, and more particularly rational expectations, in the conduct of stabilization policy. . . . Anyone interested in the role of government in economics should read this important book."—C. Glyn Williams, The Wall Street Review of Books

"This is a most timely and valuable contribution. . . . The contributors and commentators are highly distinguished and the editor has usefully collated comments and the ensuing discussion. Unusually for a conference proceedings the book is well indexed and it is also replete with numerous and up-to-date references. . . . This is the first serious book to examine the rational expectations thesis in any depth, and it will prove invaluable to anyone involved with macroeconomic policy generally and with monetary economics in particular."—G. K. Shaw, The Economic Journal

Table of Contents

Stanley Fischer
1. Rational Expectations, Business Cycles, and Government Behavior
Herschel I. Grossman
2. Unanticipated Money and Economic Activity
Robert J. Barro and Mark Rush
Comments: Alan Blinder, Robert J. Gordon, and Robert Weintraub
General Discussion
3. The Monetary Mechanism in the Light of Rational Expectations
Olivier Jean Blanchard
Comments: Bennet T. McCallum, Michael Parkin, and David E. Lindsey
General Discussion
4. Can the Fed Control Real Interest Rates?
Robert J. Shiller
Comments: Phillip Cagan, Charles R. Nelson, James L. Pierce, and Martin Feldstein
General Discussion
5. A Competitive Theory of Fluctuations and the Feasibility and Desirability of Stabilization Policy
Finn Kydland and Edward C. Prescott
Comments: Martin Feldstein, Robert E. Hall, and John B. Taylor
General Discussion
6. Rules, Discretion, and the Role of the Economic Advisor
Robert E. Lucas
7. On Activist Monetary Policy with Rational Expectations
Stanley Fischer
Comments on Chapters 6 and 7: Robert E. Hall, Mark H. Willes, and Peter Howitt
General Discussion of Chapters 6 and 7
8. What to Do (Macroeconomically) When OPEC Comes
Robert M. Solow
Comment: Neil Wallace
9. Macroeconomic Policy, 1971-75: An Appraisal
William Poole
Comment: James L. Pierce
General Discussion of Chapters 8 and 9
List of Participants

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