Conflicting Claims and Monetary Policy Rules: A Theoretical View

Richard Burdekin and Paul Burkett
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Paul Burkett: Indiana State University

Chapter 3 in Distributional Conflict and Inflation, 1996, pp 57-76 from Palgrave Macmillan

Abstract: Abstract As noted in Chapter 2, the argument for ‘non-activist’ monetary policy rules is in large part based on the proposition that there is no long-run tradeoff between inflation and unemployment (Friedman, 1968). Rational expectations have been further taken to imply that, in a classical model where markets are continuously cleared by price changes (that is, with no long-term contracts or coordination failures which cause agents to be quantity constrained), there will be no exploitable tradeoff even in the short run (Sargent and Wallace, 1975). Here, systematic policy is anticipated by economic agents and – with the help of the Walrasian auctioneer – effectively neutralized, leaving unemployment unchanged at the ‘natural rate’.

Keywords: Monetary Policy; Rational Expectation; Natural Rate; Phillips Curve; Validation Rate (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37173-6_4

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DOI: 10.1057/9780230371736_4

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