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New classical/real business cycle macroeconomics. The anatomy of a revolution

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  • Michel DE VROEY

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

The 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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Paper 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.

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Length: 27
Date of creation: 01 Aug 2009
Date of revision:
Handle: RePEc:ctl:louvir:2009026

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Cited by:
  1. Boris Salazar, 2013. "¿Crisis después de la crisis? La macroeconomía financiera después de la crisis global," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 15(28), pages 127-158, January-J.
  2. Salazar Trujillo, Boris, 2013. "¿Crisis después de la crisis?: el estado de la macroeconomía financiera después de la crisis global," DOCUMENTOS DE TRABAJO-CIDSE 011025, UNIVERSIDAD DEL VALLE - CIDSE.

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