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Non-Activist Monetary Policy from a Conflict Perspective

In: Distributional Conflict and Inflation

Author

Listed:
  • Richard C. K. Burdekin

    (Claremont McKenna College)

  • Paul Burkett

    (Indiana State University)

Abstract

Since Friedman’s (1959) influential arguments in favor of governing monetary policy by rules rather than discretion, the ‘New Classical’ school has added a significant twist to this debate. Indeed, application of the rational expectations hypothesis to a classical, frictionless model (as exemplified by Sargent and Wallace (1975)) provides an extreme case in which economic agents’ optimizing adjustments render systematic monetary stabilization policies ineffective, not only in the long run (Friedman, 1968) but also in the short run. According to Barro (1976), the New Classical analysis implies that only where the policymaker has some informational advantage over the private sector is there any role for stabilization policy under rational expectations. Otherwise, ‘the conclusions for monetary policy are in accord with the philosophy behind Friedman’s proposal for a constant growth rate rule’ (ibid, p.26).

Suggested Citation

  • Richard C. K. Burdekin & Paul Burkett, 1996. "Non-Activist Monetary Policy from a Conflict Perspective," Palgrave Macmillan Books, in: Distributional Conflict and Inflation, chapter 2, pages 37-56, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-37173-6_3
    DOI: 10.1057/9780230371736_3
    as

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