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The Relevance of Haavelmo's Macroeconomic Theorizing for Contemporary Macro Policy Making

  • Sheetal K. Chand

    (Neapolis University, Cyprus)

This paper reviews Haavelmo’s basic macroeconomic model, and argues that even though it was minted in the 1950s it remains highly relevant today. Key features that contribute to its relevance are that it integrates balance sheet transactions with flow activities such as production, consumption, and investment; allows shocks emanating from either the financial or real sides to impact on the other; and provides a unified theory of how underemployment and full employment can be generated. These features have not been adequately dealt with in the current dynamic stochastic general equilibrium (DSGE) paradigm.

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File URL: http://www.nopecjournal.org/NOPEC_2012_a03.pdf
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Article provided by Nordic Journal of Political Economy in its journal Nordic Journal of Political Economy.

Volume (Year): 37 (2012)
Issue (Month): ()
Pages: 3

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Handle: RePEc:noj:journl:v:37:y:2012:p:3
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  1. David Colander & Peter Howitt & Alan Kirman & Axel Leijonhufvud & Perry Mehrling, 2008. "Beyond DSGE Models: Toward an Empirically Based Macroeconomics," American Economic Review, American Economic Association, vol. 98(2), pages 236-40, May.
  2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973, April.
  3. Ricardo J. Caballero, 2010. "Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 85-102, Fall.
  4. David Laidler, 2009. "Financial Stability, Monetarism and the Wicksell Connection," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 1(1), pages 60-79, September.
  5. Kallåk Anundsen , André & Sigurd Holmsen Krogh, Tord & Nymoen, Ragnar & Vislie, Jon, 2011. "Overdeterminacy and endogenous cycles: Trygve Haavelmo’s business cycle model and its implications for monetary policy," Memorandum 03/2011, Oslo University, Department of Economics.
  6. Wicksell, Knut, 1907. "The Influence of the Rate of Interest on Prices," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 17, pages 213-220.
  7. Yener Altunbas & Leonardo Gambacorta & David Marques-Ibanez, 2010. "Does monetary policy affect bank risk-taking?," BIS Working Papers 298, Bank for International Settlements.
  8. Joseph E. Stiglitz, 2011. "Rethinking Macroeconomics: What Failed, And How To Repair It," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 591-645, 08.
  9. Michael Woodford, 2010. "Simple Analytics of the Government Expenditure Multiplier," NBER Working Papers 15714, National Bureau of Economic Research, Inc.
  10. Paul Grauwe, 2010. "The scientific foundation of dynamic stochastic general equilibrium (DSGE) models," Public Choice, Springer, vol. 144(3), pages 413-443, September.
  11. Haavelmo, Trygve, 1978. " Wicksell on the Currency Theory vs. the Banking Principle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 80(2), pages 209-15.
  12. Karl Ove Moene & Asbjorn Rodseth, 1991. "Nobel Laureate: Trygve Haavelmo," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 175-192, Summer.
  13. Michael Woodford, 2010. "Financial Intermediation and Macroeconomic Analysis," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 21-44, Fall.
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