IDEAS home Printed from https://ideas.repec.org/a/kap/iecepo/v11y2014i4p481-527.html
   My bibliography  Save this article

Issues of modern macroeconomics: new post-crisis perspectives on the world economy

Author

Listed:
  • Paul Welfens

    ()

Abstract

Modern macroeconomics has failed in the analysis of both the US banking and the euro crises, respectively, and there is also a rather inadequate view on a range of relevant policy issues. The approach presented herein looks at the reasons for analytical failure and suggests means of improvement – picking up proposals from the literature as well as contributing new ones. The economics profession did not anticipate the banking crisis and there is reluctance to switch to a new paradigm for stabilization policy analysis. Beyond this, there are several analytical challenges which should be integrated into a post-crisis approach: for example, the question of the true degree of economic openness and the role of multinational companies. Moreover, the macroeconomic impact of the digital economic expansion is largely underestimated. The traditional view on asset bubbles has become doubtful. A new paradigm should emphasize the triple analytical challenge of short-term financial market analysis, the routine new questioning of the systemic stability of economic systems and standard macroeconomic modeling – with some refinements; a “Schumpeterian Mundell-Fleming-Solow-Akerlof-model” and sustainability aspects are important on the one hand, on the other hand NKM models have to integrate a broader array of market imperfections. The perspectives presented could jump-start a new paradigm that combines a more realistic macro perspective with a complementary critical institutional analysis. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Paul Welfens, 2014. "Issues of modern macroeconomics: new post-crisis perspectives on the world economy," International Economics and Economic Policy, Springer, vol. 11(4), pages 481-527, December.
  • Handle: RePEc:kap:iecepo:v:11:y:2014:i:4:p:481-527
    DOI: 10.1007/s10368-014-0299-2
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10368-014-0299-2
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paul Welfens & Jens Perret, 2014. "Information & communication technology and true real GDP: economic analysis and findings for selected countries," International Economics and Economic Policy, Springer, vol. 11(1), pages 5-27, February.
    2. Jesús Fernández-Villaverde & Luis Garicano & Tano Santos, 2013. "Political Credit Cycles: The Case of the Eurozone," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 145-166, Summer.
    3. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    4. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    5. Iacoviello, Matteo, 2004. "Consumption, house prices, and collateral constraints: a structural econometric analysis," Journal of Housing Economics, Elsevier, vol. 13(4), pages 304-320, December.
    6. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-248, April.
    7. Jappelli, Tullio & Pagano, Marco, 1989. "Consumption and Capital Market Imperfections: An International Comparison," American Economic Review, American Economic Association, vol. 79(5), pages 1088-1105, December.
    8. Chris Carroll & Wendy Dunn, 1997. "Unemployment Expectations, Jumping (S,s) Triggers, and Household Balance Sheets," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 165-230, National Bureau of Economic Research, Inc.
    9. Kenneth A. Froot & Jeremy C. Stein, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1191-1217.
    10. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
    11. C.A.E. Goodhart, 2008. "The background to the 2007 financial crisis," International Economics and Economic Policy, Springer, vol. 4(4), pages 331-346, February.
    12. Paul Welfens, 2009. "Transatlantische Bankenkrise: Dynamik und neue Reformoptionen," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 89(10), pages 684-690, October.
    13. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
    14. Robert Kollmann & Werner Roeger & Jan in'tVeld, 2012. "Fiscal Policy in a Financial Crisis: Standard Policy vs. Bank Rescue Measure," Working Papers ECARES ECARES 2012-008, ULB -- Universite Libre de Bruxelles.
    15. Campbell, John Y & Mankiw, N Gregory, 1990. "Permanent Income, Current Income, and Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 265-279, July.
    16. Bretschger, Lucas & Hettich, Frank, 2002. "Globalisation, capital mobility and tax competition: theory and evidence for OECD countries," European Journal of Political Economy, Elsevier, vol. 18(4), pages 695-716, November.
    17. 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.
    18. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    19. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
    20. Welfens, Paul J. J. & Irawan, Tony, 2014. "European Innovation Dynamics and US Economic Impact: Theory and Empirical Analysis," IZA Discussion Papers 8507, Institute of Labor Economics (IZA).
    21. Raghuram G. Rajan, 2005. "Has financial development made the world riskier?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 313-369.
    22. Paul Welfens & Jens Perret & Deniz Erdem, 2010. "Global economic sustainability indicator: analysis and policy options for the Copenhagen process," International Economics and Economic Policy, Springer, vol. 7(2), pages 153-185, August.
    23. Otmar Issing, 2009. "Asset Prices and Monetary Policy," Cato Journal, Cato Journal, Cato Institute, vol. 29(1), pages 45-51, Winter.
    24. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
    25. Robert Kollmann & Werner Roeger & Jan in't Veld, 2012. "Fiscal Policy in a Financial Crisis: Standard Policy versus Bank Rescue Measures," American Economic Review, American Economic Association, vol. 102(3), pages 77-81, May.
    26. repec:fth:jonhop:386 is not listed on IDEAS
    27. Andre Jungmittag & Paul Welfens, 2009. "Liberalization of EU telecommunications and trade: theory, gravity equation analysis and policy implications," International Economics and Economic Policy, Springer, vol. 6(1), pages 23-39, June.
    28. Barrell, Ray & Pain, Nigel, 1997. "Foreign Direct Investment, Technological Change, and Economic Growth within Europe," Economic Journal, Royal Economic Society, vol. 107(445), pages 1770-1786, November.
    29. Paul Welfens, 2012. "Marshall-Lerner condition and economic globalization," International Economics and Economic Policy, Springer, vol. 9(2), pages 191-207, June.
    30. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    31. Paul Welfens, 2010. "Transatlantic banking crisis: analysis, rating, policy issues," International Economics and Economic Policy, Springer, vol. 7(1), pages 3-48, May.
    32. Helmut Wagner, 2010. "The causes of the recent financial crisis and the role of central banks in avoiding the next one," International Economics and Economic Policy, Springer, vol. 7(1), pages 63-82, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul Welfens, 2015. "Innovation, inequality and a golden rule for growth in an economy with Cobb-Douglas function and an R&D sector," International Economics and Economic Policy, Springer, vol. 12(4), pages 469-496, October.
    2. Tatyana A. Khudyakova & Andrey V. Shmidt, 2019. "Impact of the Global Recession on Financial and Economic Sustainability of Industrial Companies," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 143-157.

    More about this item

    Keywords

    Banking crisis; Macroeconomics; Forecasting; International economics; Economic policy; E00; F00; G01; G21;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F00 - International Economics - - General - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:iecepo:v:11:y:2014:i:4:p:481-527. 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: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: http://www.springer.com .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.