Structural Uncertainty and Monetary Stabilization Policy
1983 (English)Report (Other academic)
The article examines what the presence of structural uncertainty implies for the formulation of monetary stabilization policy in rational-expectations models of the Sargent-Wallace type. The policy ineffectiveness proposition if Sargent and Wallace is interpreted as a special case of Theil's certainty equivalence theorem. This theorem breaks down when there is structural uncetainty of the multiplicative-disturbance variety. Thereby a rationale for monetary stabilization policy under rational expectations is provided.
Place, publisher, year, edition, pages
Stockholm: IIES , 1983. , 26 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 250
IdentifiersURN: urn:nbn:se:su:diva-41481OAI: oai:DiVA.org:su-41481DiVA: diva2:330443
Published in connection with a visit at the IIES2010-07-152010-07-152010-07-15