NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model

Olivier J. Blanchard, Jeffrey Sachs

NBER Working Paper No. 971
Issued in August 1982
NBER Program(s):   EFG

This paper presents an intertemporal disequilibrium model with rational expectations, i.e. a model in which agents anticipate the future rationally, but in which prices and wages may not adjust fast enough to maintain continuous market clearing. Therefore, optimizing firms and households base their intertemporal plans on anticipations of both future quantity constraints and future prices. Such a model shows clearly that the effect of a policy depends not only on its current values but its anticipated path, After a presentation of the model and its basic dynamics, we therefore consider the effects of various paths of fiscal policy on the economy.

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Document Object Identifier (DOI): 10.3386/w0971

Published: Blanchard, Olivier J. and Jeffrey Sachs. "Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model." Annales De L'Insee, Vol. 47/48 , (December 1982), pp. 117-144.

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