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The non-existence of an inflation-output trade-off under the rational expectations hypothesis as the cause of the steady state situation. Overtaking attempt

Author

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  • Abouderaz Sofiane

    (UMBB - Université M'Hamed Bougara Boumerdes)

Abstract

This article tries to prove the existence of an inflation-output (unemployment) trade-off, at least in the long-run, under a context of the rational expectations hypothesis REH, which makes it possible to overcome the Lucasian steady state situation. This existence of trade-off is due to the importance of saving and the accumulation of capital over time, as well as to unexpected economic policies by the agents, which is essential for economic growth. To achieve this objective, we will expose the unrealistic aspect of REH which avoids any inflation-output (unemployment) trade-off in the short-run and the long-run, and consequently it leads the economy to an infinite steady state situation. Our work undertakes a personal philosophical and mathematical approach, which finds its origins in the pioneering works of economic growth theory, namely those of Harrod, Domar and Solow. We have tried to propose a solution for overcoming the steady state à la Lucas.

Suggested Citation

  • Abouderaz Sofiane, 2022. "The non-existence of an inflation-output trade-off under the rational expectations hypothesis as the cause of the steady state situation. Overtaking attempt," Post-Print hal-04183452, HAL.
    • Handle: RePEc:hal:journl:hal-04183452
    Note: View the original document on HAL open archive server: https://cnrs.hal.science/hal-04183452
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    Keywords

    Rational expectations hypothesis inflation-output trade-off steady state natural long-run equilibrium super-neutrality of money NAIRU Phillips curve Harrod-Domar consistency condition saving capital accumulation. JEL classification codes: B22 E21 E22 E23 E24 E58; Rational expectations hypothesis; inflation-output trade-off; steady state; natural long-run equilibrium; super-neutrality of money; NAIRU; Phillips curve; Harrod-Domar consistency condition; saving; capital accumulation. JEL classification codes: B22; E21; E22; E23; E24; E58;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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