By Jacques Drèze
Major students learn a number particular departures from basic equilibrium idea that have major implications for the macroeconomic research of either constructed and constructing economies. Jacques Dr?ze considers uncertainty and incomplete markets and Nobel Laureate Robert Solow relates development idea to the macroeconomic framework. different concerns tested are the consequences for macro-policy of recent learn, together with Joseph Stiglitz's caution at the lost zeal for monetary industry liberalization which in part engendered the East Asian and Russian crises.
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Additional info for Advances in Macroeconomic Theory (International Economic Association Conference Volume No. 133)
I am not now concerned with that sort of thing. Another source of heated opposition within the economics profession arose mainly from resistance to the downgrading of the role of prices in the short-run macrodynamic story told in the Keynesian style. That is what I want to concentrate on. ) I believe that the subtext of the tremendous academic fuss about ‘microfoundations’ for macroeconomics was really all about the market-clearing function of prices. There were always at least informal microfoundations for Keynesian models, just the wrong sort of micro-foundations.
The selection of a specific equilibrium depends in particular upon the unobserved state of information of the agents. Regarding tomorrow’s equilibrium, multiplicity and volatility are two sides of the same coin. When resources are under-utilized, there typically exist other equilibria at less restrictive levels of current and future constraints but still compatible with the fundamentals of the economy (physical assets and technology, demand and supply behaviour) and with the price rigidities. In such a case, there is a coordination failure, and the issue of devising a corrective policy arises.
Then we are back to the Ramsey problem pure and simple. Of course there are no planning boards any more, certainly not successful ones. So the likeliest field of application for aggregative growth models is the one that I mentioned first: the description and analysis of the average behaviour of an economy over a long-enough period that business cycles can be seen as minor deviations. This way of looking at it casts an interesting light on the real-businesscycle model. One possible interpretation is the planning board again.
Advances in Macroeconomic Theory (International Economic Association Conference Volume No. 133) by Jacques Drèze