Rethinking the micro-foundations of macroeconomics: insights from behavioural economics
In the aftermath of the financial crisis, macroeconomics is at a crossroads: on the one hand, the analytically rigorous, assumption-based approaches based on dynamic stochastic general equilibrium (DSGE) models lack intuitive plausibility and predictive power; on the other hand, alternative models lack an underlying analytical core. Behavioural economics offers a potential solution if it can unify intuition and analytical rigour. The aim of this paper is to assess the extent to which macroeconomics can embed behavioural and psychological insights from behavioural microeconomic analysis in order to build a rigorous and intuitively plausible understanding of how economic systems, including the macroeconomy and the financial system, work.
Volume (Year): 11 (2014)
Issue (Month): 1 (April)
|Contact details of provider:|| Web page: http://www.elgaronline.com/ejeep|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Woodford, Michael, 1990.
"Learning to Believe in Sunspots,"
Econometric Society, vol. 58(2), pages 277-307, March.
- Dow Alexander & Dow Sheila C., 2011. "Animal Spirits Revisited," Capitalism and Society, De Gruyter, vol. 6(2), pages 1-25, December.
- Davidson, Paul, 1997. "Are Grains of Sand in the Wheels of International Finance Sufficient to Do the Job When Boulders Are Often Required?," Economic Journal, Royal Economic Society, vol. 107(442), pages 671-686, May.
- O'Donoghue, Ted & Rabin, Matthew, 1997.
"Doing It Now or Later,"
Department of Economics, Working Paper Series
qt7t44m5b0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
- Ted O'Donoghue & Matthew Rabin, 1996. "Doing It Now or Later," Discussion Papers 1172, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Thaler, Richard H & Shefrin, H M, 1981.
"An Economic Theory of Self-Control,"
Journal of Political Economy,
University of Chicago Press, vol. 89(2), pages 392-406, April.
- J. M. Keynes, 1937. "The General Theory of Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 51(2), pages 209-223.
- Roger E.A. Farmer & Jang Ting Guo, 1992.
"Real Business Cycles and the Animal Spirits Hypothesis,"
UCLA Economics Working Papers
680, UCLA Department of Economics.
- Farmer Roger E. A. & Guo Jang-Ting, 1994. "Real Business Cycles and the Animal Spirits Hypothesis," Journal of Economic Theory, Elsevier, vol. 63(1), pages 42-72, June.
- George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
- Avery, Christopher & Zemsky, Peter, 1998. "Multidimensional Uncertainty and Herd Behavior in Financial Markets," American Economic Review, American Economic Association, vol. 88(4), pages 724-748, September.
- Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
- Howitt, P. & Mcfee, R.P., 1990.
UWO Department of Economics Working Papers
9005, University of Western Ontario, Department of Economics.
- George-Marios Angeletos, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
- Koutsobinas, Theodore, 2011. "Animal spirits, liquidity-preference and Keynesian behavioural macroeconomics: An intertemporal framework," MPRA Paper 43027, University Library of Munich, Germany.
- Paul Davidson, 2008. "Securitization, Liquidity, and Market Failure," Challenge, M.E. Sharpe, Inc., vol. 51(3), pages 43-56, June.
- Paul Grauwe, 2011. "Animal spirits and monetary policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(2), pages 423-457, June.
- Elster, Jon, 1996. "Rationality and the Emotions," Economic Journal, Royal Economic Society, vol. 106(438), pages 1386-1397, September.
- Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
- Roger Koppl, 1991. "Retrospectives: Animal Spirits," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 203-210, Summer.
- Scharfstein, David. & Stein, Jeremy C., 1988.
"Herd behavior and investment,"
WP 2062-88., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Robert J. Shiller, 2003.
"From Efficient Markets Theory to Behavioral Finance,"
Journal of Economic Perspectives,
American Economic Association, vol. 17(1), pages 83-104, Winter.
- Robert J. Shiller, 2002. "From Efficient Market Theory to Behavioral Finance," Cowles Foundation Discussion Papers 1385, Cowles Foundation for Research in Economics, Yale University.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010.
"A theory of Fads, Fashion, Custom and cultural change as informational Cascades,"
Levine's Working Paper Archive
1193, David K. Levine.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Michelle Baddeley, 2006. "Behind the black box: a survey of real-world investment appraisal approaches," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 33(5), pages 329-350, December.
- David Laibson, 1997.
"Golden Eggs and Hyperbolic Discounting,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(2), pages 443-478.
- B. Douglas Bernheim & Antonio Rangel, 2004. "Addiction and Cue-Triggered Decision Processes," American Economic Review, American Economic Association, vol. 94(5), pages 1558-1590, December.
- Nuno Martins, 2011. "Can neuroscience inform economics? Rationality, emotions and preference formation," Cambridge Journal of Economics, Oxford University Press, vol. 35(2), pages 251-267.
- Paul De Grauwe, 2012. "Lectures on Behavioral Macroeconomics," Economics Books, Princeton University Press, edition 1, number 9891.
- Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
When requesting a correction, please mention this item's handle: RePEc:elg:ejeepi:v:11:y:2014:i:1:p99-112. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helen Craven)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.