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Methodological Issues and the New Keynesian Economics

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Listed author(s):
  • Joseph E. Stiglitz

Abstract

While recent alternative approaches to macroeconomics have all begun with the presumption that macro-economic behavior ought to be derived from micro-economic foundations, they have differed in their views concerning the appropriate micro-foundations. This paper explores some of the key methodological issues, including those concerning the use of representative agent models, choices in parameterization, problems in aggregation and modeling adjustment processes and speeds, the imposition of ad hoc assumptions, such as that of instantaneous market clearing, and alternative approaches to validation of proposed theories. The paper summarizes the basic questions with which macro-economic theory should be concerned. Focusing on the labor market, it explains why New Keynesian Theories provide a better explanation of the observed phenomena than do alternatives.

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File URL: http://www.nber.org/papers/w3580.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3580.

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Date of creation: Jan 1991
Publication status: published as Macroeconomics - A Survey of Research Strategies, edited by Alessandro Vercelli and Nicola Dimitri, pp. 38-86. New York: Oxford University Press, 1992 .
Handle: RePEc:nbr:nberwo:3580
Note: EFG
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  1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  3. Mantel, Rolf R., 1974. "On the characterization of aggregate excess demand," Journal of Economic Theory, Elsevier, vol. 7(3), pages 348-353, March.
  4. Gale, Ian L & Stiglitz, Joseph E, 1989. " The Informational Content of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 44(2), pages 469-477, June.
  5. George A. Akerlof & Janet L. Yellen, 1985. "A Near-Rational Model of the Business Cycle, with Wage and Price Inertia," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 823-838.
  6. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  7. Alan S. Blinder, 1986. "Can the Production Smoothing Model of Inventory Behavior be Saved?," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 431-453.
  8. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  9. Arnott, Richard J & Hosios, Arthur J & Stiglitz, Joseph E, 1988. "Implicit Contracts, Labor Mobility, and Unemployment," American Economic Review, American Economic Association, vol. 78(5), pages 1046-1066, December.
  10. Albert Ma, Ching-to & Weiss, Andrew M., 1993. "A signaling theory of unemployment," European Economic Review, Elsevier, vol. 37(1), pages 135-157, January.
  11. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
  12. Jean-Pascal Benassy, 1975. "Neo-Keynesian Disequilibrium Theory in a Monetary Economy," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 503-523.
  13. Greenwald, Bruce & Stiglitz, Joseph E & Weiss, Andrew, 1984. "Informational Imperfections in the Capital Market and Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 74(2), pages 194-199, May.
  14. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  15. Assar Lindbeck & Dennis J. Snower, 1989. "The Insider-Outsider Theory of Employment and Unemployment," MIT Press Books, The MIT Press, edition 1, volume 1, number 026262074x, July.
  16. Grossman, Sanford J & Stiglitz, Joseph E, 1976. "Information and Competitive Price Systems," American Economic Review, American Economic Association, vol. 66(2), pages 246-253, May.
  17. Debreu, Gerard, 1974. "Excess demand functions," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 15-21, March.
  18. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  19. Robert M. Solow & Joseph E. Stiglitz, 1968. "Output, Employment, and Wages in the Short Run," The Quarterly Journal of Economics, Oxford University Press, vol. 82(4), pages 537-560.
  20. Bruce C. Greenwald & Joseph E. Stiglitz, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 229-264.
  21. Abel, Andrew B., 1982. "Dynamic effects of permanent and temporary tax policies in a q model of investment," Journal of Monetary Economics, Elsevier, vol. 9(3), pages 353-373.
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Cited by:

  1. Ghassan Dibeh, 2001. "Time Delays and Business Cycles: Hilferding's model revisited," Review of Political Economy, Taylor & Francis Journals, vol. 13(3), pages 329-341.
  2. Ronny Mazzocchi, 2013. "Scope and Flaws of the New Neoclassical Synthesis," DEM Discussion Papers 2013/13, Department of Economics and Management.
  3. Ramser, Hans Jürgen, 1992. "Nicht-kompetitive Gütermärkte im makroökonomischen Modell," Discussion Papers, Series I 263, University of Konstanz, Department of Economics.

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