Cite JOURNAL ARTICLE
The Correct Economic Interpretation of Rational Expectations
Credit and Capital Markets – Kredit und Kapital, Vol. 28 (1995), Iss. 2 : pp. 221–226
Hans Gersbach, Basel
Azariadis, C. (1993) Intertemporal Macroeconomics, Blackwell, Massachusetts.
Bernholz, P. and Gersbach, H. (1992) The Present Monetary Theory of Advance Inflation: A Failure? The Journal of Institutional and Theoretical Economics, 148, 705 - 719.
Buiter, W. (1990) Principles of Budgetary and Financial Policy, Harvester Wheatsheaf, New York and London.
In a comment on my article, Wesche and Wierum criticize the derived relationship between money growth and inflation during accelerating inflation for a model with exponential money demand. However, their analysis has several flaws and the authors seem not to be aware of the economic content of rational expectations equilibria. A correct calculation and interpretation of their exercise fully supports the conclusions in my earlier paper.