New classical/real business cycle macroeconomics. The anatomy of a revolution
AbstractThe aim of the present paper is to assess the new classical/real business cycle revolution, which dethroned Keynesian macroeconomics. In its first part, I critically discuss the microfoundations requirement that constitutes a cornerstone of the new approach and suggest an alternative, softer, formulation of it. The conclusion of this discussion is that the new classical/real business cycle revolution marked a transition from a soft to a demanding understanding of the microfoundations requirement. In the second part of the paper, I present additional salient traits of the new classical and the real business cycle stages of the revolution. While each of these stages brought a specific contribution to the revolution, I emphasize the decisive role played by Kydland and Prescott in re-orienting the type of work in which macroeconomists were engaged. Finally, in part three, I ponder upon the causes of this revolution. After presenting and assessing Prescott’s and Lucas’s accounts of the factors which gave rise to the new approach, I venture into muddier waters by raising the question of whether a political agenda underpinned the NC/RBC revolution.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2009026.
Date of creation: 01 Aug 2009
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-31 (All new papers)
- NEP-DGE-2009-10-31 (Dynamic General Equilibrium)
- NEP-MAC-2009-10-31 (Macroeconomics)
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