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 InfoPaper provided by UCLA Department of Economics in its series UCLA Economics Online Papers with number 274.
Date of creation: 20 Oct 2003
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Other versions of this item:
- Aoki, Masanao & Yoshikawa, Hiroshi, 2006. "Uncertainty, policy ineffectiveness, and long stagnation of the macroeconomy," Japan and the World Economy, Elsevier, vol. 18(3), pages 261-272, August.
- 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.
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