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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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Macroeconomic Features of the French Revolution

Macroeconomic Features of the French Revolution

(p.248) 9 Macroeconomic Features of the French Revolution
Rational Expectations and Inflation

François R. Velde

Princeton University Press

This chapter examines the French Revolution from the vantage point of macroeconomic theories about government budget constraints. From 1688 to 1788, Britain won and France lost three of four wars. France recurrently defaulted on its debt, while Britain did not. After 1688, Britain had reformed its institutions to allow it to raise enough taxes during peacetime to finance debts incurred in times of war, while France sustained institutions designed to constrain the king's revenues. The chapter considers two macroeconomic ideas and three models of money: unpleasant arithmetic, sustainable plans, tax-backed or asset-backed models of the demand for currency, legal restrictions models of the demand for currency, and classical hyperinflation models along lines described by Phillip Cagan. Inflation during the French Revolution are interpreted in terms of a procession of regimes in which the “if” parts of the three types of monetary models are approximately fulfilled.

Keywords:   macroeconomic theories, government budget constraint, Britain, France, unpleasant arithmetic, sustainable plan, currency, hyperinflation, French Revolution, inflation

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