The Role of Economic Policy After the New Classical Macroeconomics

Willem Buiter

No 6, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: The paper considers the implications of the rational expectations - New Classical Macroeconomics revolution for the "rules versus discretion" debate. The following issues are covered 1) The ineffectiveness of anticipated stabilization policy, 2) Non-causal models and rational expectations, 3) optimal control in non-causal models -the inconsistency of optimal plans. I established the robustness of the proposition that contingent (closed-loop or feedback) rules dominate fixed (open-loop) rules. The optimal contingent rule in non-causal models - the innovation or disturbance-contingent feedback rule - is quite different from the state-contingent feedback rule derived by dynamic stochastic programming

Date: 1980-11
Note: ITI IFM
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Working Paper: The Role of Economic Policy after the New Classical Macroeconomics (1980)
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