The Role of Economic Policy after the New Classical Macroeconomics

Willem H. Buiter

NBER Working Paper No. 580
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-clausal 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.

(539 K)

Published:

• Buiter, Willem H. "The Macroeconomics Of Dr Pangloss: Critical Survey Of The New Classical Macroeconomics," Economic Journal, 1980, v90(357), 34-50. ,
• Buiter, Willem H. "The Role of Economic Policy after the New Classical Macroeconomics." Macroeconomic Analysis, edited by D. Currie, R. Nobay, and D.A . Peel, London, (1981), pp. 233-295.

This paper is available as PDF (539 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX