Does the World Fit the Models?

Michael Carter and Rodney Maddock
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Michael Carter: The Australian National University
Rodney Maddock: The Australian National University

Chapter 6 in Rational Expectations, 1984, pp 121-143 from Palgrave Macmillan

Abstract: Abstract The theory of rational expectations poses a fundamental challenge to the established orthodoxy that governments can and should utilise a variety of demand-management policies to maintain full employment. More specifically, ‘rational expectations’ have been interpreted to imply that policy-makers cannot, even in the short run, alter the level of unemployment systematically through the management of aggregate demand. Clearly the implications for macroeconomic policy are enormous. But is the theory right?

Keywords: Monetary Policy; Forecast Error; Money Supply; Rational Expectation; Natural Rate (search for similar items in EconPapers)
Date: 1984
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DOI: 10.1007/978-1-349-17644-1_6

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