IDEAS home Printed from https://ideas.repec.org/p/mse/cesdoc/17043.html
   My bibliography  Save this paper

Stagflation and the crossroad in macroeconomics: the struggle between structural and New Classical macroeconometrics

Author

Abstract

The article studies the 1978 macroeconomics conference titled “After the Phillips Curve”, where Lucas and Sargent presented their fierce attack against structural macroeconometric models, “After Keynesian Macroeconomics”. The article aims at enlarging the comprehension of changes in macroeconomics in the 1970s. It shows: 1) that Lucas and Sargent dit not tackle directly the issue of the explanation of stagflation; 2) but that the struggle between different methodological stances in the conference cannot be separated from the way macroeconomists interpreted stagflation; 3) that it was not an opposition between being in favor or against microfounded models, but rather on the way we build microfoundations; 4) finally that the study of the 1978 conference opens the doors for scrutinizing the evolution of institution macroeconometric models of the 1970s which were not totally overthrown by Lucas and Sargent's arguments

Suggested Citation

  • Aurélien Goutsmedt, 2017. "Stagflation and the crossroad in macroeconomics: the struggle between structural and New Classical macroeconometrics," Documents de travail du Centre d'Economie de la Sorbonne 17043, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:17043
    as

    Download full text from publisher

    File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2017/17043.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marvin Goodfriend & Robert G. King, 2013. "The Great Inflation Drift," NBER Chapters, in: The Great Inflation: The Rebirth of Modern Central Banking, pages 181-209, National Bureau of Economic Research, Inc.
    2. Brayton, Flint & Levin, Andrew & Lyon, Ralph & Williams, John C., 1997. "The evolution of macro models at the Federal Reserve Board," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 43-81, December.
    3. Aurélien Goutsmedt, 2017. "Thomas Sargent face à Robert Lucas : une autre ambition pour la Nouvelle Economie Classique," Documents de travail du Centre d'Economie de la Sorbonne 17013, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. N. G. Mankiw, 2009. "The Macroeconomist as Scientist and Engineer," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 5.
    5. Marvin Goodfriend & Robert G. King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296, National Bureau of Economic Research, Inc.
    6. Sargent, Thomas J, 1971. "A Note on the 'Accelerationist' Controversy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 3(3), pages 721-725, August.
    7. repec:ucp:bkecon:9780226520018 is not listed on IDEAS
    8. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, vol. 67(2), pages 101-115, March.
    9. Riccardo DiCecio & Edward Nelson, 2013. "The Great Inflation in the United States and the United Kingdom: Reconciling Policy Decisions and Data Outcomes," NBER Chapters, in: The Great Inflation: The Rebirth of Modern Central Banking, pages 393-438, National Bureau of Economic Research, Inc.
    10. Sargent, Thomas J. & Wallace, Neil, 1976. "Rational expectations and the theory of economic policy," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 169-183, April.
    11. Mishkin, Frederic S, 1982. "Does Anticipated Aggregate Demand Policy Matter? Further Econometric Results," American Economic Review, American Economic Association, vol. 72(4), pages 788-802, September.
    12. Fair, Ray C & Taylor, John B, 1983. "Solution and Maximum Likelihood Estimation of Dynamic Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 51(4), pages 1169-1185, July.
    13. Edward J. Nell & Karim Errouaki, 2013. "Rational Econometric Man," Books, Edward Elgar Publishing, number 13976.
    14. Fair, Ray C., 2012. "Has macro progressed?," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 2-10.
    15. Andrew Levin & John B. Taylor, 2013. "Falling Behind the Curve: A Positive Analysis of Stop-Start Monetary Policies and the Great Inflation," NBER Chapters, in: The Great Inflation: The Rebirth of Modern Central Banking, pages 217-244, National Bureau of Economic Research, Inc.
    16. Aurélien Goutsmedt & Erich Pinzon-Fuchs & Matthieu Renault & Francesco Sergi, 2015. "Criticizing the Lucas Critique: Macroeconometricians' Response to Robert Lucas," Post-Print halshs-01179114, HAL.
    17. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    18. Robert J. Barro & Mark Rush, 1980. "Unanticipated Money and Economic Activity," NBER Chapters, in: Rational Expectations and Economic Policy, pages 23-73, National Bureau of Economic Research, Inc.
    19. repec:ucp:bkecon:9780226519944 is not listed on IDEAS
    20. James L. Pierce & Jared J. Enzler, 1974. "The Effects of External Inflationary Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 5(1), pages 13-62.
    21. Brian Snowdon & Howard R. Vane, 1999. "Conversations with Leading Economists," Books, Edward Elgar Publishing, number 1607.
    22. Friedman, Benjamin M., 1979. "Optimal expectations and the extreme information assumptions of `rational expectations' macromodels," Journal of Monetary Economics, Elsevier, vol. 5(1), pages 23-41, January.
    23. Pedro Garcia Duarte & Gilberto Tadeu Lima, 2012. "Microfoundations Reconsidered," Books, Edward Elgar Publishing, number 14869.
    24. Robert E. Lucas, Jr., 1980. "Rules, Discretion, and the Role of the Economic Advisor," NBER Chapters, in: Rational Expectations and Economic Policy, pages 199-210, National Bureau of Economic Research, Inc.
    25. Robert J. Shiller, 1980. "Can the Fed Control Real Interest Rates?," NBER Chapters, in: Rational Expectations and Economic Policy, pages 117-167, National Bureau of Economic Research, Inc.
    26. Pedro Garcia Duarte, 2012. "Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics," Chapters, in: Microfoundations Reconsidered, chapter 6, Edward Elgar Publishing.
    27. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    28. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-254, April.
    29. Kevin D. Hoover, 2012. "Microfoundational Programs," Chapters, in: Microfoundations Reconsidered, chapter 1, Edward Elgar Publishing.
    30. Gordon, Robert J, 1982. "Price Inertia and Policy Ineffectiveness in the United States, 1890-1980," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1087-1117, December.
    31. T. Muench & A. Rolnick & N. Wallace & W. Weiler, 1974. "Tests for Structural Change and Prediction Intervals for the Reduced Forms of Two Structural Models of the US: The FRB-MIT and Michigan Quarterly Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 3, pages 491-519, National Bureau of Economic Research, Inc.
    32. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    33. Finn Kydland & Edward C. Prescott, 1980. "A Competitive Theory of Fluctuations and the Feasibility and Desirability of Stabilization Policy," NBER Chapters, in: Rational Expectations and Economic Policy, pages 169-198, National Bureau of Economic Research, Inc.
    34. Brian Snowdon & Howard Vane, 1998. "Transforming macroeconomics: an interview with Robert E. Lucas Jr," Journal of Economic Methodology, Taylor & Francis Journals, vol. 5(1), pages 115-146.
    35. Qin, Duo, 2013. "A History of Econometrics: The Reformation from the 1970s," OUP Catalogue, Oxford University Press, number 9780199679348.
    36. K. J. Arrow, 1964. "The Role of Securities in the Optimal Allocation of Risk-bearing," Review of Economic Studies, Oxford University Press, vol. 31(2), pages 91-96.
    37. Stanley Fischer, 1980. "Rational Expectations and Economic Policy," NBER Books, National Bureau of Economic Research, Inc, number fisc80-1, October.
    38. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    39. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678-678.
    40. Olivier Jean Blanchard, 1980. "The Monetary Mechanism in the Light of Rational Expectations," NBER Chapters, in: Rational Expectations and Economic Policy, pages 75-116, National Bureau of Economic Research, Inc.
    41. Fair, Ray C & Jaffee, Dwight M, 1972. "Methods of Estimation for Markets in Disequilibrium," Econometrica, Econometric Society, vol. 40(3), pages 497-514, May.
    42. Robert M. Solow, 1980. "What to Do (Macroeconomically) When OPEC Comes," NBER Chapters, in: Rational Expectations and Economic Policy, pages 249-267, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rancan, Antonella, 2022. "The "place of the Phillips curve" in macroeconometric models: The case of the first Federal Reserve Board's model (1966-1980s)," Economics & Statistics Discussion Papers esdp22080, University of Molise, Department of Economics.
    2. Goutsmedt, Aurélien & Sergi, Francesco & Guizzo, Danielle, 2019. "An Agenda without a Plan: Robert E. Lucas's Trajectory throught the Public Debate," OSF Preprints 7jpa9, Center for Open Science.
    3. Rancan, Antonella, 2021. "The “Place Of The Phillips Curve” in Macroeconometric Models: The Case of the First Federal Reserve Board’s Model (1966-1980s)," OSF Preprints t5jrx, Center for Open Science.
    4. Aurélien Goutsmedt & Cléo Chassonnery-Zaïgouche, 2023. "Modeling intervention: The Political element in Barbara Bergmann's micro-to-macro simulation projects," Working Papers hal-04208686, HAL.
    5. Matthieu Renault, 2018. "Edmond Malinvaud´s Criticisms of the New Classical Economics: Restoring the Nature and the Rationale of the Old Keynesians´ Opposition," Working Papers, Department of Economics 2018_21, University of São Paulo (FEA-USP).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goutsmedt, Aurélien, 2019. "Macroeconomics at the Crossroads: Stagflation and the Struggle between "Keynesian" and New Classical Macroeconometric Programs," OSF Preprints y364t, Center for Open Science.
    2. Kevin D. Hoover & Òscar Jordà, 2001. "Measuring systematic monetary policy," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 113-144.
    3. Kevin D. Hoover & Òscar Jordà, 2001. "Measuring systematic monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 83(Jul), pages 113-144.
    4. Frederic S. Mishkin, 2007. "Will Monetary Policy Become More of a Science?," NBER Working Papers 13566, National Bureau of Economic Research, Inc.
    5. Lucas Papademos, 2005. "Macroeconomic theory and monetary policy: the contributions of Franco Modigliani and the ongoing debate," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 187-214.
    6. Bennett T. McCallum, 2002. "Recent developments in monetary policy analysis: the roles of theory and evidence," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 67-96.
    7. Antoine d'Autume, 1986. "Les anticipations rationnelles dans l'analyse macro-économique," Revue Économique, Programme National Persée, vol. 37(2), pages 243-284.
    8. Hugo C. W. Chu, 2015. "Lucas’ Equilibrium Account of the Business Cycle: Optimizing Behavior, General Equilibrium, and Modeling Rational Expectations," Working Papers, Department of Economics 2015_30, University of São Paulo (FEA-USP).
    9. Francesco Sergi, 2015. "L'histoire (faussement) naïve des modèles DSGE," Documents de travail du Centre d'Economie de la Sorbonne 15066, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    10. Zijp, R. van, 1990. "New classical monetary business cycle theory," Serie Research Memoranda 0058, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    11. Lucas Papademos, 2005. "Macroeconomic theory and monetary policy: the contributions of Franco Modigliani and the ongoing debate," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 187-214.
    12. Hugo Chu Chun Wei, 2018. "Representative Agent, Rational Expectations, And General Equilibrium Theory In Lucas?S Theoretical Framework: Some Considerations," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 9, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    13. Aurélien Goutsmedt, 2016. "The New Classical Explanation of the Stagflation: A Psychological Way of Thinking," Documents de travail du Centre d'Economie de la Sorbonne 16018, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    14. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    15. Aurélien Goutsmedt & Erich Pinzon-Fuchs & Matthieu Renault & Francesco Sergi, 2015. "Criticizing the Lucas Critique: Macroeconometricians' Response to Robert Lucas," Post-Print halshs-01179114, HAL.
    16. Duo Qin, 2010. "Modelling of the Inflation-Unemployment Tradeoff from the Perspective of the History of Econometrics," Working Papers 661, Queen Mary University of London, School of Economics and Finance.
    17. Pedro Garcia Duarte, 2012. "Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics," Chapters, in: Microfoundations Reconsidered, chapter 6, Edward Elgar Publishing.
    18. Frederic S. Mishkin, 2011. "Monetary Policy Strategy: Lessons from the Crisis," NBER Working Papers 16755, National Bureau of Economic Research, Inc.
    19. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050, Elsevier.
    20. Robert J. Gordon, 2011. "The History of the Phillips Curve: Consensus and Bifurcation," Economica, London School of Economics and Political Science, vol. 78(309), pages 10-50, January.

    More about this item

    Keywords

    History of macroeconomics; Keynesian economics; Microfoundations; Structural Macroeconometric Models;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mse:cesdoc:17043. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lucie Label (email available below). General contact details of provider: https://edirc.repec.org/data/cenp1fr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.