NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Natural-Rate Hypothesis, the Rational-Expectations Hypothesis, and the Remarkable Survival of Non-Market-Clearing Assumptions

Herschel I. Grossman

NBER Working Paper No. 1010 (Also Reprint No. r0452)
Issued in October 1982
NBER Program(s):   EFG

Non-market-clearing models continue to dominate analysis of macroeconomic fluctuations and discussions of macroeconomic policy. This situation is remarkable because non-market-clearing assumptions seem to be inconsistent with the essential presumption of neoclassical economic analysis that market outcomes exhaust opportunities for mutually advantageous exchange. Non-market-clearing models apparently have survived because they have evolved to incorporate both the natural-rate hypothesis and the rational-expectations hypothesis and because the alternative "equilibrium" approach has failed empirically.This paper expands on these ideas and briefly discusses some of the problems that we face in attempting to evaluate empirically the recent vintage of non-market-clearing models. The main difficulties seem to involve accounting for shifts in the natural levels of real aggregates and specifying the timing of the past anticipations that determine the effects of current monetary policy.

download in pdf format
   (238 K)

email paper

This paper is available as PDF (238 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1010

Published: Grossman, Herchel I. "The Natural-Rate Hypothesis, the Rational-Expectations Hypothesis, and the Remarkable Survival of Non-Market-Clearing Assumptions." Carnegie-Rochester Conference Series on Public Policy, ed. K. Brunnerand A. Meltzer, Vol. 19, (1983), pp. 225-245.

Users who downloaded this paper also downloaded these:
Greenwald and Stiglitz w2160 Keynesian, New Keynesian, and New Classical Economics
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us