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Rational Expectations and Inflation$
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Thomas J. Sargent

Print publication date: 2013

Print ISBN-13: 9780691158709

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691158709.001.0001

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Reaganomics and Credibility

Reaganomics and Credibility

(p.17) 2 Reaganomics and Credibility
Rational Expectations and Inflation

Thomas J. Sargent

Princeton University Press

This chapter examines the monetary and fiscal authorities of a single country as a “team” and judges their patterns of behavior against standards absorbed from the sports pages. This view provides a broad framework for summarizing classic doctrines and controversies in government finance, and also serves as a basis for criticizing the way in which monetary policy as well as fiscal policy have been coordinated de facto in the United States over the last several years. The chapter first considers a few formal definitions of concepts that will help to clarify the analogy between the quarterback-end problem and the monetary-fiscal problem. It then discusses an economy as a dynamic game and whether government deficits are inflationary. Finally, it explores whether Reaganomics was credible.

Keywords:   government finance, monetary policy, fiscal policy, economy, dynamic game, government deficit, inflation, Reaganomics

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