Policy Effectiveness and Design in New Classical Models.

Stabilization policy is feasible and desirable in a class of standard new classical rational expectations macromodels even when full information output is policy independent. Neither different information across private agents nor the existence of an economy-wide financial market are necessary for the above result. In a context of partial current information, policy effectiveness only requires that the price level is a nonpredetermined variable. Copyright 1988 by Royal Economic Society.