NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Role of Economic Policy After the New Classical Macroeconomics

Willem H. Buiter

NBER Technical Working Paper No. 6
Issued in November 1980
NBER Program(s):   ITI   IFM

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

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Document Object Identifier (DOI): 10.3386/t0006

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