Evolutionary Economics, Rational Expectations, and Monetary Policy

Frazer, William J.

doi:10.1080/00213624.1978.11503534

Cited by 5 publications

(2 citation statements)

References 25 publications

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“…Liquidity is the key, the link between the present and the future. There is, of course, much more-rational expectations and the like (Frazer, 1978). Now, however, against the foregoing background, a recession occurs as a response to preferences for more liquidity.…”

Section: Discussionmentioning

confidence: 92%

The Government Budget Constraint

Frazer

1978

Public Finance Quarterly

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This paper restates the government budget constraint and addresses the issue Abstract of symmetry (asymmetry, as it turns out) between the definitions of monetary and fiscal policy, as originally advanced by Blinder and Solow. The emphasis is on the arbitrary definition of monetary policy. It suits their convenience, but renders their approach inoperative. A consideration of several analytical, operational, and definitional problems constitutes a defense of the monetarist position on the government budget constraint.Blinder and Solow (1974: 57) say that in the hands of the monetarists the government budget constraint generally comes out: &dquo;Deficit spending carries with it either creation of new high-powered money [in which case the monetarists call it monetary policy] or new bond flotations [in which case they deny it will be expansionary].&dquo; Blinder and Solow then say that the constraint may read: &dquo;You cannot increase the high-powered money stock [or simply commercial bank reserves] without either deficit spending or bond retirement.&dquo; Finally, they say: &dquo;This symmetry [noted in these two positions] has only rarely been appreciated by the monetarists.&dquo; This paper is addressed to the issue of symmetry (or asymmetry, as it turns out), after briefly restating the government budget constraint. It is, namely, the constraint imposed on the financing of a deficit in nominal dollar terms-denoted P(G-T)-by the need for a change in bank reserves over time (dR/ dt) and/ or by the need for additional borrowing by the government from the private sector through the sale of bonds over time (dB/ dt). An equation may be written:

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Section: Discussionmentioning

confidence: 92%

The Government Budget Constraint

Frazer

1978

Public Finance Quarterly

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“…Marxists do not necessarily reject the commonsensical statement that people do the best they can, but they object to the transformation of this statement into its 14. Instances of these criticisms are Davidson 1978, Frazer 1978, and Simon 1978 neoclassical form, that is into a constrained optimization procedure of certain so-called objective functions. Neo-Keynesians do not even disagree with this transformation but they do object to its application in a theory of rational expectations.…”

Section: Commonsense Argumentsmentioning

confidence: 98%