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Economic policy as expectations management: Keynes’ and Friedman's complementary approaches

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We investigate how Keynes and Friedman, respectively, address the issue of the disequilibria at stake in a monetary economy through a shared concern for the formation of expectations. We show that Keynes was interested in the coordination of long-term expectations regarding non-monetary assets prospective yields, while Friedman focused on the adaptation of short-term nominal expectations. Regarding the remedies to these disequilibria, both economists called for devices that aim to stabilise market expectations. As a direct outcome, Keynes designed policies that aim to stabilise the long-term state of expectations while Friedman basically aimed at the acceleration of the competitive adjustment process.
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Keywords: B22; B31; E40; E52; E62; Economic policy; expectations; stabilisation

Document Type: Research Article

Publication date: September 3, 2017

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