Uncertainty, policy ineffectiveness, and long stagnation of the macroeconomy
AbstractThe standard analysis in macroeconomics depends on the assumption of the representative agent. However, when the degree of uncertainty becomes significant, we cannot ignore a simple fact that the macroeconomy consists of a large number of heterogeneous agents. In this paper, we demonstrate the importance of the combinatory aspect. Specifically, the effectiveness of policy necessarily weakens as the degree of uncertainty rises. One might call this probrem "uncertainty trap". This may contribute to long stagnation of the macroeconomy.
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Bibliographic InfoArticle provided by Elsevier in its journal Japan and the World Economy.
Volume (Year): 18 (2006)
Issue (Month): 3 (August)
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Web page: http://www.elsevier.com/locate/inca/505557
Other versions of this item:
- Masanao Aoki & Hiroshi Yoshikawa, 2003. "Uncertainty, Policy Ineffectiveness, and Long Stagnation of the Macroeconomy," CIRJE F-Series CIRJE-F-197, CIRJE, Faculty of Economics, University of Tokyo.
- Masanao Aoki, 2003. "Uncertainty, Policy Ineffectiveness, and Long Stagnation of the Macroeconomy," UCLA Economics Online Papers 274, UCLA Department of Economics.
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