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Rational Expectations and the New Macroeconomics

Patrick Minford (Author)

9780631177883, Wiley

Paperback / softback, published 23 July 1992

260 pages
22.3 x 15.5 x 2 cm, 0.397 kg

Rational Expectations Macroeconomics is the second edition of Rational Expectations and the New Macroeconomics by Patrick Minford and David Peel. Under the sole authorship of Profesor Minford, this new dition represents a practical introduction to the principles and applications of rational expectations (RE) methods in macroeconomics for third year undergraduates and postgraduates.

The author sets out to provide a basic working knowledge of the Rational Expectations Hypothesis (REH) by demonstrating in full various methods for solving RE models. The book then deals with policies and issues frequently encountered when applying these models including: stabilization policy, fiscal policy, the political economy of democracy and the Phillips curve. Finally, the author turns to methods of testing the REH. By the end of the book, students should be in a position to apply RE models to whatever economy they are concerned with. Professor Minford has updated the text extensively and included new chapters on representatitve agent models (increasingly used in a applied forecasting and policy analysis) and modelling the open economy.

In the decade since the first edition of this classic text was written, the economics profession's respect for the REH has only increased. The author's introductory and concluding chapters place the REH research programme in its historical context, assess the current state of the debate and look ahead to future research in this important subject.

List of Tables and Figures viii

Preface to the Second Edition xi

Preface to the First Edition xiii

1 Introductory Ideas 1

2 Solving Rational Expectations Models 12

3 Partial Information and Signal Extraction 42

4 Stabilization Policy 58

5 Problems in Choosing Optimal Policies 83

6 Budget Deficits and Their Financing 103

7 The Political Economy of Democracy 123

8 The Macroeconomics of an Open Economy 139

9 Representative Agent Models in Cashless Economies 156

10 Money in Representative Agent Models 174

11 Testing the Rational Expectations Hypothesis 186

12 Interpreting the Evidence: The Problem of Observational Equivalence 212

13 Direct Tests of Rational Expectations 223

References 228

Index 239

Subject Areas: Economics [KC]

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