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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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    File URL: http://www.nopecjournal.org/NOPEC_2012_a03.pdf
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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.
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    3. repec:elg:eechap:17588_14 is not listed on IDEAS
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    6. David Colander & Peter Howitt & Alan Kirman & Axel Leijonhufvud & Perry Mehrling, 2018. "Beyond DSGE Models: Toward an Empirically Based Macroeconomics," Chapters,in: How Economics Should Be Done, chapter 14, pages 212-216 Edward Elgar Publishing.
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    8. Haavelmo, Trygve, 1978. " Wicksell on the Currency Theory vs. the Banking Principle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 80(2), pages 209-215.
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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.
    13. 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, August.
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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.

    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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