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Rational Expectations and Crowding-Out

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Allsbrook, O. Rational Expectations and Crowding-Out. Credit and Capital Markets – Kredit und Kapital, 19(2), 248-251. https://doi.org/10.3790/ccm.19.2.248
Allsbrook, Odgen O. "Rational Expectations and Crowding-Out" Credit and Capital Markets – Kredit und Kapital 19.2, 1986, 248-251. https://doi.org/10.3790/ccm.19.2.248
Allsbrook, Odgen O. (1986): Rational Expectations and Crowding-Out, in: Credit and Capital Markets – Kredit und Kapital, vol. 19, iss. 2, 248-251, [online] https://doi.org/10.3790/ccm.19.2.248

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Rational Expectations and Crowding-Out

Allsbrook, Odgen O.

Credit and Capital Markets – Kredit und Kapital, Vol. 19 (1986), Iss. 2 : pp. 248–251

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Ogden O. Allsbrook, Jr., Athens, Georgia

References

  1. Begg, D. K. H., The Rational Expectations Revolution in Macroeconomics (Baltimore: Johns Hopkins University Press, 1982).  Google Scholar
  2. Sargent, T. J., and Neil Wallace, “Rational Expectations, the Optimal Monetary Instrument, and The Optimal Money Supply Rule.” Journal of Political Economy. 1975 – 83, 241 – 254.  Google Scholar

Abstract

Rational Expectations and Crowding-Out

This paper reorders the IS – LM geometry to include rational expectations. When monetary policy is then applied, the effect is one of crowding-out. Hence, the assumptions of rational expectations, expansionary monetary policy, and reduced demand for real balances leads to reduced saving and investment ratios and an increased consumption ratio. It is thus the case that non-neutrality of money in a distributional or compositional sense exists.