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Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model

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  • Olivier J. Blanchard
  • Jeffrey Sachs

Abstract

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.

Suggested Citation

  • Olivier J. Blanchard & Jeffrey Sachs, 1982. "Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model," NBER Working Papers 0971, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0971
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    1. Abel, Andrew B & Blanchard, Olivier J, 1983. "An Intertemporal Model of Saving and Investment," Econometrica, Econometric Society, vol. 51(3), pages 675-692, May.
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    1. van de Klundert, T.C.M.J., 1988. "Wage rigidity, capital accumulation and unemployment in a small open economy," Other publications TiSEM 619a319e-33e9-49e1-917c-7, Tilburg University, School of Economics and Management.
    2. Rama, Martin, 1990. "Empirical investment equations in developing countries," Policy Research Working Paper Series 563, The World Bank.
    3. Rankin, Neil & Scalera, Domenico, 1995. "Death and the Keynesian multiplier," Ricerche Economiche, Elsevier, vol. 49(1), pages 75-87, March.
    4. Laffargue, Jean-Pierre & Malgrange, Pierre & Pujol, Thierry, 1992. "Une maquette trimestrielle de l’économie française avec anticipations rationnelles et concurrence monopolistique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 68(1), pages 225-261, mars et j.
    5. van de Klundert, Th. & Peters, P., 1986. "Tax incidence in a model with perfect foresight of agents and rationing in markets," Journal of Public Economics, Elsevier, vol. 30(1), pages 37-59, June.
    6. van de Klundert, T.C.M.J., 1986. "Economic resilience : a two-country analysis," Other publications TiSEM 4043a5d9-a677-4744-94e7-1, Tilburg University, School of Economics and Management.
    7. Feltenstein, Andrew & Morris, Stephen, 1988. "Fiscal stabilization and exchange rate instability," Policy Research Working Paper Series 74, The World Bank.
    8. Richard N. Cooper & Jeffrey Sachs, 1984. "Borrowing Abroad: The Debtor's Perspective," NBER Working Papers 1427, National Bureau of Economic Research, Inc.
    9. van de Klundert, T.C.M.J. & Peters, P., 1986. "Price inertia in a macroeconomic model of monopolistic competition," Other publications TiSEM 9b1b7d62-903d-4ebd-a4cf-a, Tilburg University, School of Economics and Management.
    10. van de Klundert, T.C.M.J. & Peters, P., 1986. "Price inertia in a macroeconomic model of monopolistic competition," Research Memorandum FEW 221, Tilburg University, School of Economics and Management.
    11. van Gemert, H.G. & de Groof, R.J. & Peer, H.W.G.M. & van Schaik, A.B.T.M., 1989. "Theo van de Klundert : A frontier economist," Other publications TiSEM 60b4aaf0-9730-4829-961a-9, Tilburg University, School of Economics and Management.
    12. Cuthbertson, K. & Gasparro, D., 1995. "Fixed investment decisions in UK manufacturing: The importance of Tobin's Q, output and debt," European Economic Review, Elsevier, vol. 39(5), pages 919-941, May.
    13. van de Klundert, T.C.M.J., 1988. "Wage rigidity, capital accumulation and unemployment in a small open economy," Research Memorandum FEW 320, Tilburg University, School of Economics and Management.
    14. van der Ploeg, F., 1987. "Rationing in open economy and dynamic macroeconomics : A survey," Other publications TiSEM fd411b51-f487-4dde-a0e9-6, Tilburg University, School of Economics and Management.

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