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 CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-197.
Length: 22 pages
Date of creation: Aug 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, 2003. "Uncertainty, Policy Ineffectiveness, and Long Stagnation of the Macroeconomy," UCLA Economics Online Papers 274, UCLA Department of Economics.
- NEP-ALL-2003-08-17 (All new papers)
- NEP-LAM-2003-08-17 (Central & South America)
- NEP-MAC-2003-08-17 (Macroeconomics)
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