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Rational Expectations and Inflation
This collection of essays written by one of the founders and chief proponents of rational expectations theory is intended as a supplement for macroeconomics courses. Thomas Sargent applies rational expectations macroeconomics at an informal, non-econometric level to interpret a variety of historical and contemporary issues. Sargent uses inflation as a natural context for applying rational expectations theory. Government efforts to stop currency depreciation, alternative monetary systems and the conflict between monetary and fiscal policies are also explored.
- GenresEconomics
224 pages, Paperback
First published January 1, 1986
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Displaying 1 - 2 of 2 reviews
September 10, 2015
This book provides and interesting take on rational expectations implications for macroeconomic policy when viewed in light of historical events.
February 13, 2023
- The author takes a look at the monetary policy of many post WW2 nations that experienced hyperinflation (namely, Germany, Austria, Poland and Hungary) and the bordering country that didn't experience hyperinflation (Czechoslovakia) and finds that:
- The hyperinflated countries all lack of financial discipline post war. In addition, their currencies were unbacked by any monetary instrument. However, the biggest difference between today's FIAT currency and the Austria-Hungary FIAT currency was due to the war, the latter countries don't have the ability to productively produce food, thus relying upon import but doesn't have the means to pay for such import
- Czechoslovakia however, did not experience hyperinflation due to the financial discipline as well as a hard monetary instrument backing such currency
- Hyperinflation ended for thus countries rather abruptly, by simplifying laying out plans to 1) cut governmental bloat and 2) increase taxation. The ironic part, the author noted, was that as soon as people learned those plans are set, they begin acting if hyperinflation is over (even though the printing press was still running when the plans were set). Thus, people's mindset is very important in the hyperinflation debate
- The author noted that while some scholar dismiss those episode as "too extreme", author believes that extreme episode ought to be studied more since if we can apply the lesson from extreme examples, we can apply the lesson for mild examples too
- The hyperinflated countries all lack of financial discipline post war. In addition, their currencies were unbacked by any monetary instrument. However, the biggest difference between today's FIAT currency and the Austria-Hungary FIAT currency was due to the war, the latter countries don't have the ability to productively produce food, thus relying upon import but doesn't have the means to pay for such import
- Czechoslovakia however, did not experience hyperinflation due to the financial discipline as well as a hard monetary instrument backing such currency
- Hyperinflation ended for thus countries rather abruptly, by simplifying laying out plans to 1) cut governmental bloat and 2) increase taxation. The ironic part, the author noted, was that as soon as people learned those plans are set, they begin acting if hyperinflation is over (even though the printing press was still running when the plans were set). Thus, people's mindset is very important in the hyperinflation debate
- The author noted that while some scholar dismiss those episode as "too extreme", author believes that extreme episode ought to be studied more since if we can apply the lesson from extreme examples, we can apply the lesson for mild examples too
Displaying 1 - 2 of 2 reviews