Towards Keynesian DSGD (isequilibrium) Modelling: Real-Financial Market Interactions with Heterogeneous Expectations Dynamics
We consider an alternative modelling approach to the mainstream DSGE paradigm, namely basically a Dynamic Stochastic General Disequilibrium model of continuous adjustment processes on interacting real and financial markets. We introduce heterogeneous capital gain expectations (chartists and fundamentalists) and show that the first type of agents tends to destabilise he economy. Global stability can be ensured if opinions favour fundamentalist behaviour far off the steady state. This interaction of expectations and population dynamics is bounding the real-financial market interactions, but allows for irregular behaviour within these bounds. Stability can be further improved by adding suitable policy measures.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 211 7778 234
Fax: +49 211 7778 4234
Web page: http://www.imk-boeckler.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Proaño, Christian R., 2011. "Exchange rate determination, macroeconomic dynamics and stability under heterogeneous behavioral FX expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 77(2), pages 177-188, February.
- James Tobin, 1982.
"Money and Finance in the Macro-Economic Process,"
Cowles Foundation Discussion Papers
613R, Cowles Foundation for Research in Economics, Yale University.
- repec:zbw:ifweej:201021 is not listed on IDEAS
- Asada, Toichiro & Chiarella, Carl & Flaschel, Peter & Mouakil, Tarik & Proaño, Christian R., 2009.
"Stabilizing an unstable economy: on the choice of proper policy measures,"
Economics Discussion Papers
2009-50, Kiel Institute for the World Economy.
- Menkhoff, Lukas & Rebitzky, Rafael R. & Schröder, Michael, 2009.
"Heterogeneity in exchange rate expectations: Evidence on the chartist-fundamentalist approach,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 70(1-2), pages 241-252, May.
- Lukas Menkhoff & Rafael R. Rebitzky & Michael Schröder, 2008. "Heterogeneity in Exchange Rate Expectations: Evidence on the Chartist-Fundamentalist Approach," CESifo Working Paper Series 2502, CESifo Group Munich.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2009.
"New Keynesian Models: Not Yet Useful for Policy Analysis,"
American Economic Journal: Macroeconomics,
American Economic Association, vol. 1(1), pages 242-66, January.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2008. "New Keynesian models: not yet useful for policy analysis," Staff Report 409, Federal Reserve Bank of Minneapolis.
- Ellen R. McGrattan & Patrick J. Kehoe & V. V. Chari, 2008. "New Keynesian models: not yet useful for policy analysis," Working Papers 664, Federal Reserve Bank of Minneapolis.
- V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2008. "New Keynesian Models: Not Yet Useful for Policy Analysis," NBER Working Papers 14313, National Bureau of Economic Research, Inc.
- Toichiro Asada & Matthieu Charpe & Peter Flaschel & Christopher Malikane & Tarik Mouakil & Christian R. ProaÃ±o, 2011. "Output, stock markets and macro-policy measures in a Keynesian portfolio model," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 8(2), pages 341-360.
- Lux, Thomas, 1995. "Herd Behaviour, Bubbles and Crashes," Economic Journal, Royal Economic Society, vol. 105(431), pages 881-96, July.
- Christina D. Romer, 1991.
"What Ended the Great Depression?,"
NBER Working Papers
3829, National Bureau of Economic Research, Inc.
- repec:zbw:ifweej:7602 is not listed on IDEAS
- repec:cup:cbooks:9780521643511 is not listed on IDEAS
- Sargent, Thomas J & Wallace, Neil, 1973. "The Stability of Models of Money and Growth with Perfect Foresight," Econometrica, Econometric Society, vol. 41(6), pages 1043-48, November.
- Carl Chiarella & Peter Flaschel & Florian Hartmann & Christian R. Proaño, 2011.
"Stock market booms, endogenous credit creation and the implications of broad and narrow banking for macroeconomic stability,"
1107, New School for Social Research, Department of Economics.
- Chiarella, Carl & Flaschel, Peter & Hartmann, Florian & Proaño, Christian R., 2012. "Stock market booms, endogenous credit creation and the implications of broad and narrow banking for macroeconomic stability," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 410-423.
- Tovar, Camilo Ernesto, 2008.
"DSGE Models and Central Banks,"
Economics Discussion Papers
2008-30, Kiel Institute for the World Economy.
- 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.
- Charpe, Matthieu & Flaschel, Peter & Hartmann, Florian & Proaño, Christian, 2011. "Stabilizing an unstable economy: Fiscal and monetary policy, stocks, and the term structure of interest rates," Economic Modelling, Elsevier, vol. 28(5), pages 2129-2136, September.
- Farmer, Roger E.A., 2010. "How to reduce unemployment: A new policy proposal," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 557-572, July.
When requesting a correction, please mention this item's handle: RePEc:imk:wpaper:93-2012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Nemitz)
If references are entirely missing, you can add them using this form.