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Macroeconomics - Which Way Now? Old versus New Styles

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  • Sheetal K. Chand

Abstract

This paper contrasts the new style of doing macroeconomics, where the emphasis is on propositions rigorously derived from neoclassical micro foundations, with the old style associated with the work of Keynes in particular. The paper argues that the latter type of model, which is based on more realistic albeit informal behavioural micro foundations, is better suited to the concerns of policy makers. However, emphasis on the new style has led to an abandonment of research on adapting the old paradigms to new concerns, with a consequent loss for practical policy making especially with respect to macro stabilization. A perspective on how the new style can and cannot be helpful is provided.

Suggested Citation

  • Sheetal K. Chand, 2004. "Macroeconomics - Which Way Now? Old versus New Styles," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 30, pages 11-26.
  • Handle: RePEc:noj:journl:v:30:y:2004:p:11-26
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    References listed on IDEAS

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    1. Andvig, Jens Christopher, 1988. "From macrodynamics to macroeconomic planning : A basic shift in Ragnar Frisch's thinking?," European Economic Review, Elsevier, vol. 32(2-3), pages 495-502, March.
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    4. Hoover,Kevin D., 2001. "The Methodology of Empirical Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521003216, April.
    5. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
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    7. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
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    9. Phelps, Edmund S & Taylor, John B, 1977. "Stabilizing Powers of Monetary Policy under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 163-190, February.
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    More about this item

    Keywords

    macroeconomic policy; neoclassical micro foundations; behavioural psychology;

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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