Internal consistency, price rigidity and the microfoundations of macroeconomics
AbstractMacromodels based on microfoundations represent the dominant approach in macroeconomics. These models appear to adopt a clear methodological approach, which promotes internal consistency above external consistency as a necessary condition of admissibility. This paper develops two arguments. The first is that internal consistency makes the development of microfounded macromodels dependent on the pace of theoretical innovation. This had led to an internal debate between 'pragmatists' who argue for limited departures from internal consistency, and 'purists' who claim that this would compromise methodological integrity. The second argument is directly relevant to this debate. It is that the inclusion of price rigidity into these models via short-cuts like Calvo contracts has required a key modification of the microfoundations methodology, such that internal consistency can only be claimed indirectly by appeal to theory developed elsewhere. This modification has repercussions that imply that the microfoundations project is not as unblemished as the 'purists' imagine.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Economic Methodology.
Volume (Year): 18 (2011)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RJEC20
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Judgement Calls and Microfoundation Tricks
by Mainly Macro in Mainly Macro on 2012-09-09 11:00:00
- New Keynesian models and the labour market
by Mainly Macro in Mainly Macro on 2013-08-23 13:30:00
- Microfoundations and Macro Wars
by Mainly Macro in Mainly Macro on 2013-10-15 23:12:00
- More on the illusion of superiority
by Mainly Macro in Mainly Macro on 2013-12-19 15:35:00
- Microfoundations and the Phillips curve
by Mainly Macro in Mainly Macro on 2014-04-02 17:20:00
- J. E. King, 2012. "Post Keynesians and Others," Review of Political Economy, Taylor & Francis Journals, vol. 24(2), pages 305-319, April.
- Andreas Orland & Michael W.M. Roos, 2011.
"The New Keynesian Phillips Curve with Myopic Agents,"
Ruhr Economic Papers
0281, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Orland, Andreas & Roos, Michael W.M., 2013. "The New Keynesian Phillips curve with myopic agents," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2270-2286.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.