Rational Expectations and Economic Policy

2010 ◽  
pp. 9-18
Author(s):  
Nicola Acocella
Keyword(s):  
Economic Policy ◽  
Private Sector ◽  
Classical Theory ◽  
Rational Expectations ◽  
Strong Argument ◽  
Lucas Critique ◽  
Strategic Context ◽  
Over Time

The introduction of rational expectations in the 1970s undermined the classical theory of economic policy laid down by Tinbergen, Theil and others. Since then rational expectations are often used as a strong argument against policy activism. However, rational expectations do not always imply policy invariance, although sometimes it happens. In fact, in certain circumstances rational expectations can enhance the policymaker's power to control an economy over time. The new theory of economic policy in a strategic context not only overcomes the Lucas critique, but states the conditions under which policymakers can be fooled by a private sector having rational expectations or, on the contrary, can manage such expectations to enhance their power to control the system.

scholarly journals The Concept of Indonesia Raya Incorporated Conforms the Constitution of Economics: Studies of Grounded Theory on State Asset Ownership Management

2018 ◽  
Vol 8 (1) ◽  
pp. 136
Author(s):  
R. Agus Trihatmoko ◽  
Y. Sri Susilo
Keyword(s):  
Economic Policy ◽  
Grounded Theory ◽  
Private Sector ◽  
Group Discussion ◽  
Regional Government ◽  
Theory Approach ◽  
Economic Policies ◽  
Asset Ownership ◽  
New Economic Policy ◽  
The Republic

The phenomenon regarding the emersion of the idea of Indonesia Raya Incorporated (IRI) is interesting to be thereferences in economic policy studies.This study aim to reveal and interpret the management of state asset ownership as a proposal on the IRI approach. This research used qualitative method, designed with grounded theory approach and constructivism philosophy. Data collection was obtained from the results of Focus Group Discussion (FGD) of economists from various universities. The results reveal that: (1) The gap on state asset ownership by state-owned enterprises(BUMN), regional government-owned enterprises(BUMD) and private sectoras a result of economic liberalization is the antecedent of the emergence of the idea about IRI; (2) IRI encourages changes in the legislation for new economic policies; (3) The new economic policy,in form of IRI eliminates the gap in state asset ownership by BUMN, BUMD and private sector; (4) The gap on state asset ownership by BUMN, BUMD, and private sector will determine the prospects of society welfare level and economic sovereignty, and finally lead to the integrity of the Unitary State of the Republic of Indonesia. It is generally concluded that IRI whichis proposed in the management of state asset ownership has fulfilled the economic constitution.

scholarly journals Fiscal Marksmanship in Pakistan

2010 ◽  
Vol 15 (2) ◽  
pp. 113-133 ◽  
Author(s):  
Muhammad Zakaria ◽  
Shujat Ali
Keyword(s):  
Prediction Error ◽  
Rational Expectations ◽  
Central Government ◽  
Mean Square ◽  
Government Budget ◽  
Exogenous Variables ◽  
Random Components ◽  
The Mean ◽  
Source Of Error ◽  
Over Time

Using Theil’s inequality coefficient based on the mean square prediction error, this paper evaluates the forecasting efficiency of the central government budget and revised budget estimates in Pakistan for the period 1987/88 to 2007/08 and decomposes the errors into biasedness, unequal variation and random components to analyze the source of error. The results reveal that budgetary forecasting is inefficient in Pakistan and the error is due mainly to exogenous variables (random factors). We also find that neither the budget nor revised budget estimates of revenue and expenditure satisfy the criteria of rational expectations of forecasting. Further, there is very little evidence of improvement in the efficiency of budgetary forecasts over time.

Competition and partnership in public and private sector strategies

2021 ◽  
Vol 27 (1) ◽  
pp. 5-20
Author(s):  
Jacek Stasiak
Keyword(s):  
Economic Policy ◽  
Private Sector ◽  
Point Of View ◽  
Public And Private ◽  
The Public ◽  
Modern Economy ◽  
Public And Private Sector

The existence of the public and private sectors in the modern economy is justified from the point of view of economic policy, especially with regard to its stabilising function (regulatory sphere) and allocative and redistributive function (real sphere).

The Rational Expectations Hypothesis and the New Classicals

2020 ◽  
pp. 57-100
Author(s):  
Christopher Tsoukis
Keyword(s):  
Market Efficiency ◽  
Bounded Rationality ◽  
Rational Expectations ◽  
Island Model ◽  
Supply Function ◽  
Stabilization Policy ◽  
Wage Setting ◽  
Expectations Hypothesis ◽  
Lucas Critique ◽  
Forward Looking

This chapter analyses the Rational Expectations Hypothesis (REH), a pillar of forward-looking macroeconomics that emphasizes expectations. It also develops its implications in terms of ‘market efficiency’ and related concepts. It then reviews New Classical Macroeconomics: its main tenets, the ‘Lucas supply function’ that is crucial for much subsequent theory, and the ‘Lucas island model’ that underpins it. The centrepiece ‘Policy Ineffectiveness Proposition’ (PIP) is developed both intuitively and more formally. Subsequently, the chapter reviews one major line of criticism of PIP, the fact that markets may not clear, based in particular on staggered wage setting. Broader criticisms of the REH, including ‘bounded rationality’, are also reviewed. The chapter concludes with yet another landmark contribution of Robert Lucas, namely the ‘Lucas critique’ of activist stabilization policy.

Shared values, shared health, shared prosperity

2020 ◽  
pp. 83-98
Author(s):  
Davies and
Keyword(s):  
Public Health ◽  
Private Sector ◽  
Working Conditions ◽  
Shared Values ◽  
Complex Relationship ◽  
Health Security ◽  
The Past ◽  
Individual Family ◽  
The Relationship ◽  
Over Time

This chapter looks at the relationship between commerce and health, some of the choices involved, and the impacts they have on total health. Public health specialists and policymakers have only recently begun to explore the complex relationship between commerce and health, what it has been in the past, what it is now, and importantly what it could look like as we re-build society post COVID-19. The role that work and employers play in our individual, family, and collective health, security, and prosperity has developed over time, and the dependence of companies on the health of their workforce, and their vulnerability when employees are ill, has changed too. The private sector can contribute to health in its immediate community, and nationally through the products it promotes, the working conditions for its employees, and the causes it supports.

The Colombian Private Sector in Colombia’s Transition to Peace

2019 ◽  
pp. 255-278
Author(s):  
Angelika Rettberg
Keyword(s):  
Civil War ◽  
Private Sector ◽  
Armed Conflict ◽  
Contextual Factors ◽  
Business Strategies ◽  
Profit Motive ◽  
Civil Action ◽  
The Many ◽  
Over Time ◽  
Armed Actors

During the Colombian civil war, businesses undertook both civil and uncivil actions, but the civil action of a “pro-peace coalition” was among the many factors moving the conflict toward its (uneasy) settlement in 2016. This chapter documents the civil action efforts of a pro-peace coalition, explores how support for these efforts changed over time—particularly in the last two attempts to negotiate peace, in Caguán (1998–2002) and in Havana, Cuba (2012–2016), and focuses on the motivations behind them. Contrary to simplistic analyses, it demonstrates that the profit motive alone cannot explain business strategies in contexts of conflict and peacebuilding. Contextual factors, the type of organization, and access to politics are important in understanding how business factions respond to armed conflict, including those participating in civil action within the “pro-peace coalition” and those aligning themselves with armed actors. The explanation of Colombian business strategies to address armed conflict holds lessons for understanding business-led civil action in other countries.

A NOTE ON OPTIMAL DEBT REDUCTION POLICIES

2019 ◽  
Vol 24 (7) ◽  
pp. 1850-1860 ◽  
Author(s):  
Davide la Torre ◽  
Simone Marsiglio
Keyword(s):  
Economic Policy ◽  
Real World ◽  
Optimal Policy ◽  
Social Costs ◽  
Social Planner ◽  
Long Run ◽  
The Social ◽  
Reduction Problem ◽  
Short Run ◽  
Over Time

We analyze the optimal debt reduction problem in an uncertainty context. The social planner has a finite horizon and seeks to minimize the social costs associated with debt repayment by taking into account not only the short-run costs of the policy, but also the long-run costs associated with the outstanding level of debt. We characterize the optimal policy and the dynamics of the debt-to-GDP ratio, showing that it will decrease over time if economic policy is effective enough. We characterize how the evolution of the debt-to-GDP ratio depends on the main parameters and we present a simple calibration based on Greek data to illustrate the implications of our analysis in real-world setups.

Corporate Profitability and Economic Policy During Argentina’s Great Depression, 1929–1934

2020 ◽  
pp. 1-28
Author(s):  
JOSEPH A. FRANCIS ◽  
CARLOS NEWLAND
Keyword(s):  
Economic Policy ◽  
Private Sector ◽  
Interest Rates ◽  
Great Depression ◽  
Public Debt ◽  
Transportation Industry ◽  
Profit Rate ◽  
International Crisis ◽  
Positive View

An analysis of corporate profitability leads to a reevaluation of economic policy during Argentina’s Great Depression. While the overall profit rate collapsed, some sectors were more affected than others: Commerce, insurance, and agriculture were worst hit, followed by transportation, industry, and finally banking, which was a beneficiary of economic policy, especially the decision not to default on or renegotiate the external public debt. Had a different economic policy been pursued, it is likely that the international crisis would not have affected Argentina so severely. Most importantly, it would have been possible to further devalue the peso, which would have benefitted both agriculture and industry. Moreover, interest rates would have been lower, and continued government borrowing would not have crowded out investment in the private sector. An analysis of corporate profitability thus leads to a less positive view of economic policy during Argentina’s Great Depression than is often found in the existing literature.

The Paradox of Managerial Downsizing

2004 ◽  
Vol 25 (7) ◽  
pp. 1159-1184 ◽  
Author(s):  
Craig R. Littler ◽  
Peter Innes
Keyword(s):  
Private Sector ◽  
Structural Changes ◽  
Organizational Strategy ◽  
National Surveys ◽  
The Us ◽  
The Usa ◽  
Organizational Hierarchies ◽  
Over Time

Delayering and the flattening of organizational hierarchies was a widespread trend through the 1990s. Peters (1992) in the USA promoted .attening as an organizational strategy and Keuning and Opheij (1994) promoted the prescriptions in Europe. Despite these strategies and apparent structural changes, the number and ratio of managers appears to have grown. This paradox of managerial downsizing has not been adequately probed in the literature. The predominant explanation, that there has been a ‘myth of managerial downsizing’, is associated with Gordon (1996). However, this debate has been shaped by the US experience and data. There is a need to reassess the dynamics of the 1990s in relation to other economies. This article focuses on a semi-peripheral economy, that of Australia. A study of the population of firms over time is necessary in order to resolve the issues. The article utilizes a comprehensive range of data, including several national surveys and a longitudinal database of all larger private-sector firms in Australia during the 1990s. The results indicate that the ‘myth of managerial downsizing’ must be rejected. There were dramatic effects on managers through the course of the 1990s in larger Australian firms. The dynamics of the process are analysed, tracking 4,153 firms across the decade and the paradox explained. The theoretical implications are discussed.

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