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The Relevance of Haavelmo’s Macroeconomic Theorizing for Contemporary Policy Making

  • Chand, Sheetal K.

    (Neapolis University, Cyprus.)

The recent great financial crisis and the ensuing deep recessions have placed in sharp relief the fundamental issue of how financial factors, including financial instability, interact with the real economy. In order to understand the nature of these interactions and formulate policies that would help contain adverse outcomes it is essential to have an adequate conceptual framework. Unfortunately, the standard DSGE approach is deficient in this regard. This paper contends that Haavelmo’s macroeconomic theorizing provides a better starting point for forging the required integration between the financial and real sectors. The paper extends the basic Haavelmo model to the contemporary scene and uses it to shed light on policy solutions to the current predicament.

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File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2012/Memo-06-2012.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 06/2012.

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Length: 34 pages
Date of creation: 27 Feb 2012
Date of revision:
Handle: RePEc:hhs:osloec:2012_006
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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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. Paul Grauwe, 2010. "The scientific foundation of dynamic stochastic general equilibrium (DSGE) models," Public Choice, Springer, vol. 144(3), pages 413-443, September.
  3. Michael Woodford, 2010. "Financial Intermediation and Macroeconomic Analysis," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 21-44, Fall.
  4. 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.
  5. Michael Woodford, 2010. "Simple Analytics of the Government Expenditure Multiplier," Discussion Papers 0910-09, Columbia University, Department of Economics.
  6. Markus K. Brunnermeier & Thomas M. Eisenbach & Yuliy Sannikov, 2012. "Macroeconomics with Financial Frictions: A Survey," Levine's Working Paper Archive 786969000000000384, David K. Levine.
  7. 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.
  8. Karl Ove Moene & Asbjorn Rodseth, 1991. "Nobel Laureate: Trygve Haavelmo," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 175-192, Summer.
  9. 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.
  10. 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.
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