The paper considers the implications of the rational expectations New Classical Macroeconomics revolution for the 'rules versus discretion' debate. The following issues are covered: 1) The ineffectiveness of anticipated stabilization policy, 2) Non-clausal models and rational expectations, 3)...

The paper addresses two issues that arise in estimation of testing of the real effects of anticipated and unanticipated money. First it is shown that identification of the effects of unanticipated (or unperceived) monetary growth on real output is possible only if the a priori restrict ion is...

The paper investigates the robustness of the proposition that in stochastic models contingent or feddback rules dominate fiped or openloop rules. Four arguments in favour of fixed rules are considere`. 1) The presence of an incompetent op malevolent policy maker. 2) A trade-off between...

The paper presents a general solution method for rational expectations models that can be represented by systems of. deterministic first order linear differential equations with constant coefficients. It is the continuous time adaptation of the method of Blanchard and Kahn. To obtain a unique...

The distinctiof between predetermined and non-predetermined variables is a crucial one in rational expectations models. I consider and reject two definitions, one proposed by Blanchard and Kahn and one by Chow. Both definitions lead to possible misc1assifications. Instead I propose the following...

The paper considers three methods for eliminating the zero lower bound on nominal interest rates and thus for restoring symmetry to domain over which the central bank can vary its policy rate. They are: (1) abolishing currency (which would also be a useful crime-fighting measure); (2) paying...

This paper analyzes Krugman's contention that there is a "gold standard paradox" in the speculative attack literature. The paradox occurs if a country's currency appreciates after it runs out of gold or equivalently if a speculative attack can happen only after the country "naturally" runs out...

The paper studies the inflation rate associated with optimal monetary policy in a standard suite of DSGE models, when fiscal policy is either unrestricted optimal or restricted but supportive of monetary policy. Full nominal price flexibility, nominal prices set one period in advance and...

In a competitive two-country overlapping generations model with perfect capital mobility, a plan that is individually Pareto optimal (that is Pareto optimal with respect to individual preferences) can be sustained without coordination of national fiscal policies when the fiscal arsenal is...

The paper studies the solvency of the Indian public sector and the eventual monetization and inflation implied by stabilization of the debt-GNP ratio without any changes in the primary deficit. The nonstationarity of the discounted public debt suggests that indefinite continuation of the pattern...