Learning about Trends: Spending and Credit Fluctuations in Open Economies

Daniel Heymann, Martin Kaufman and Pablo Sanguinetti
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Daniel Heymann: Torcuato di Tella Institute and University of Buenos Aires
Martin Kaufman: International Monetary Fund

Chapter 6 in Monetary Theory as a Basis for Monetary Policy, 2001, pp 173-214 from Palgrave Macmillan

Abstract: Abstract This chapter is inspired by an old theme. The view that misperceptions about the future outcomes of current plans can generate business fluctuations has a long tradition in the literature. Theories that allow for the existence of intertemporal co-ordination failures can have different specific features (see Leijonhufvud (1968, 1981)). They have in common the argument that agents decide on the basis of a less than perfect knowledge of the ‘laws of motion’ of the environment, and that the consequent difficulties in forming expectations can have noticeable macroeconomic consequences. In particular, a class of cyclical ups and downs may emerge when agents cannot forecast accurately the characteristics of the economy’s growth path.

Keywords: Interest Rate; Real Exchange Rate; Credit Market; Adjustment Cost; Aggregate Output (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1007/978-1-4039-3961-6_6

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