The Development of Keynesian Macroeconomics
This paper provides an outline of the historical development of Keynesian macroeconomics. It first argues that the business-cycle model of J.M. Keynes's General Theory featured analytical ingredients that were present in earlier writings and attained its theoretical precision only in contributions made later. Remaining sections of the paper focus on the key characteristic of Keynesian theory, namely, a postulated stickiness of nominal prices that enables aggregate demand to play a greater role in output determination than it does in flexible-price classical analysis. Three approaches that have been historically important are ones relying upon (i) equilibria conditional on given prices, (i ) algebraic Phillips-type price adjustment relations, and (iii) equilibrium analysis 'with incomplete information. The paper reviews difficulties with each of these and concludes with a discussion of relevant issues of today.
|Date of creation:||Feb 1987|
|Date of revision:|
|Publication status:||published as McCallum, Bennett T. "The Development of Keynesian Macroeconomics," American Economic Review, Vol. 77, No. 2, May 1987, pp. 125-129.|
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- Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
- Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, vol. 75(4), pages 708-20, September.
- McCallum, Bennett T, 1986.
"On "Real' and "Sticky-Price' Theories of the Business Cycle,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 18(4), pages 397-414, November.
- Bennett T. McCallum, 1986. "On "Real" and "Sticky-Price" Theories of the Business Cycle," NBER Working Papers 1933, National Bureau of Economic Research, Inc.
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