This collection of essays uses the lens of rational expectations
theory to examine how governments anticipate and plan for
inflation, and provides insight into the pioneering research for
which Thomas Sargent was awarded the 2011 Nobel Prize in economics.
Rational expectations theory is based on the simple premise that
people will use all the information available to them in making
economic decisions, yet applying the theory to macroeconomics and
econometrics is technically demanding. Here, Sargent engages with
practical problems in economics in a less formal, noneconometric
way, demonstrating how rational expectations can satisfactorily
interpret a range of historical and contemporary events. He focuses
on periods of actual or threatened depreciation in the value of a
nation's currency. Drawing on historical attempts to counter
inflation, from the French Revolution and the aftermath of World
War I to the economic policies of Margaret Thatcher and Ronald
Reagan, Sargent finds that there is no purely monetary cure for
inflation; rather, monetary and fiscal policies must be
coordinated.
This fully expanded edition of "Rational Expectations and
Inflation" includes Sargent's 2011 Nobel lecture, "United States
Then, Europe Now." It also features new articles on the
macroeconomics of the French Revolution and government budget
deficits.
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