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Methodological Issues and the New Keynesian Economics

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  • 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.

Suggested Citation

  • Joseph E. Stiglitz, 1991. "Methodological Issues and the New Keynesian Economics," NBER Working Papers 3580, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3580
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    1. Koford, Kenneth J & Miller, Jeffrey B, 1992. "Macroeconomic Market Incentive Plans: History and Theoretical Rationale," American Economic Review, American Economic Association, vol. 82(2), pages 330-334, May.
    2. 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.
    3. Robert Boyer, 1992. "La crise de la macroéconomie, une conséquence de la méconnaissance des institutions?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 68(1), pages 43-68.
    4. Yuli Radev, 2015. "New dynamic disequilibrium," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 65-90.
    5. Ramser, Hans Jürgen, 1992. "Nicht-kompetitive Gütermärkte im makroökonomischen Modell," Discussion Papers, Series I 263, University of Konstanz, Department of Economics.
    6. Marc Bassoni & André Cartapanis, 1995. "Autonomie des banques centrales et performances macro-économiques : Un réexamen," Revue Économique, Programme National Persée, vol. 46(2), pages 415-432.
    7. Ronny Mazzocchi, 2013. "Scope and Flaws of the New Neoclassical Synthesis," DEM Discussion Papers 2013/13, Department of Economics and Management.
    8. Jean-Claude Milleron, 1992. "Les métiers de l'économiste au service de la décision," Revue Économique, Programme National Persée, vol. 43(4), pages 797-810.

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