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

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  • Sheetal K. Chand

    (Neapolis University, Cyprus)

Abstract

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.

Suggested Citation

  • Sheetal K. Chand, 2012. "The Relevance of Haavelmo's Macroeconomic Theorizing for Contemporary Macro Policy Making," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 37, pages 1-3.
    • Handle: RePEc:noj:journl:v:37:y:2012:p:3
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    References listed on IDEAS

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    1. 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.
    2. Yener Altunbas & Leonardo Gambacorta & David Marques-Ibanez, 2010. "Does monetary policy affect bank risk-taking?," BIS Working Papers 298, Bank for International Settlements.
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    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.
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    Cited by:

    1. André K. Anundsen & Tord S. Krogh & Ragnar Nymoen & Jon Vislie, 2014. "Overdeterminacy and Endogenous Cycles: Trygve Haavelmo's Business Cycle Model," Metroeconomica, Wiley Blackwell, vol. 65(3), pages 460-486, July.

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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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