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Keynesian Theory and the AD-AS Framework: A Reconsideration

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Author Info
Amitava K. Dutt () (University of Notre Dame)
Peter Skott () (University of Massachusetts Amherst)

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Abstract

Contrary to what has been argued by a number of critics, the AD-AS framework is both internally consistent and in conformity with Keynes’s own analysis. Moreover, the eclectic approach to behavioral foundations allows models in this tradition to take into account aggregation problems as well as evidence from behavioral economics. Unencumbered by the straightjacket of optimizing microfoundations, the approach can provide a useful starting point for the analysis of dynamic macroeconomic interactions. In developing this analysis, the AD-AS approach can draw on insights from the Post Keynesian, neo-Marxian and structuralist traditions, as well as from the burgeoning literature on behavioral economics. JEL Categories: E12, O11, B22, B41, B50

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series Working Papers with number 2005-11.

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Date of creation: Aug 2005
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Handle: RePEc:ums:papers:2005-11

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Keywords: AS-AD; Keynes; New Keynesian theory; microeconomic foundations;

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