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Learning about Trends: Spending and Credit Fluctuations in Open Economies

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Monetary Theory as a Basis for Monetary Policy

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Abstract

This chapter is inspired by an old theme. The view that misperceptions about the future outcomes of current plans can generate business fluctuations has a long tradition in the literature. Theories that allow for the existence of intertemporal co-ordination failures can have different specific features (see Leijonhufvud (1968, 1981)). They have in common the argument that agents decide on the basis of a less than perfect knowledge of the ‘laws of motion’ of the environment, and that the consequent difficulties in forming expectations can have noticeable macroeconomic consequences. In particular, a class of cyclical ups and downs may emerge when agents cannot forecast accurately the characteristics of the economy’s growth path.

Special thanks are due to P. Azcue for the advice and help he gave in performing the simulations which are reported in Section 3 of the chapter. The comments received from S. Galiani, F. Guerrero, A. Leijonhufvud and J. P. Nicolini are gratefully acknowledged. The views expressed are not necessarily those of the institutions where the authors serve.

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Author information

Authors and Affiliations

  1. UN Economic Commission for Latin America, Torcuato di Tella Institute and University of Buenos Aires, Argentina

    Daniel Heymann

  2. International Monetary Fund, Washington DC, USA

    Martin Kaufman

  3. University Torcuato di Tella, Buenos Aires, Argentina

    Pablo Sanguinetti

Authors
  1. Daniel Heymann
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  2. Martin Kaufman
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  3. Pablo Sanguinetti
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Editor information

Editors and Affiliations

  1. University of Trento, Italy

    Axel Leijonhufvud

Copyright information

© 2001 International Economic Association

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Heymann, D., Kaufman, M., Sanguinetti, P. (2001). Learning about Trends: Spending and Credit Fluctuations in Open Economies. In: Leijonhufvud, A. (eds) Monetary Theory as a Basis for Monetary Policy. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-4039-3961-6_6

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