Rational Expectations and Inflation

“Reading it now, more than ten years later, it’s interesting to notice that the institutional setup of the Euro area, or the European Union, has changed in important ways since Sargent gave that lecture. There’s the issue of Brexit, but that’s not central here. What has happened is that the Euro crisis has been resolved with some intervention from the central government, indeed resembling, in some ways, what happened in the United States 300 years ago. Also, there has been not a complete fiscal union, but some change in the degree of centralisation of fiscal policy in the Euro area, with more powers going to the central authority. I think the European Union resembles the United States a bit more now than it did ten years ago, when Sargent gave the lecture. The comparison is very relevant. The lecture is delivered in a very sharp way. It’s very clear, very insightful, and touches on many topics of great breadth, which I think is inspiring for a student of macroeconomics or for anybody interested in macroeconomic issues in general.” Read more...

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Sergio de Ferra, Economist