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"Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule
Abstract
Alternative monetary policies are analyzed in an ad hoc macroeconomic model in which the public's expectations about prices are rational. The ad hoc model is one in which there is long-run neutrality, since it incorporates the aggregate supply schedule proposed by Lucas. Following Poole, the paper studies whether pegging the interest rate or pegging the money supply period by period minimizes an ad hoc quadratic loss function. It turns out that the probility distribution of output--dispersion as well as mean--is independent of the particular deterministic money supply rule in effect, and that under an interest rate rule the price level is indeterminate.
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Citations
Cited by
Staggered prices in a utility-maximizing framework
Calvo, G. A. (1983) · Journal of Monetary Economics · doi:10.1016/0304-3932(83)90060-0 · Cited by 7,901
An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility
Becker, G. S., & Tomes, N. (1979) · Journal of Political Economy · doi:10.1086/260831 · Cited by 2,243
Financial Development and the Effectiveness of Monetary Policy Channels in Nigeria: A DSGE Approach
Apanisile, O. T., & Osinubi, T. T. (2020) · Journal of African Business · doi:10.1080/15228916.2019.1625021 · Cited by 17
Enisan, A. A., & Tolulope, A. O. (2019) · Global Business Review · doi:10.1177/0972150918825194 · Cited by 8
Metadata
- Authors
- Sargent, T. J., & Wallace, N.
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 1975-04
- Volume
- 83
- Issue
- 2
- Pages
- 241-254
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W2090766058
- Cited by
- 2,168
- References
- 0
- FWCI
- 101.37
- Type
- journal article
- Language
- en
- Open access
- closed
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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