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Macroeconomics After Two Decades of Rational Expectations

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  • Bennett T. McCallum

Abstract

This expository paper describes major developments during the second decade of rational-expectations macroeconomics, roughly 1982-1991. Topics attracting the most attention from researchers differed from those of 1972-1981, with considerable emphasis being devoted to technical mailers. Here the discussion focuses on four prominent areas: real business cycle analysis, growth theory and its empirical application, issues involving unit roots in macroeconomic time series, and sticky-price models of aggregate supply. The paper concludes by arguing that the current state of knowledge in macroeconomics is not as bad as is often suggested.

Suggested Citation

  • Bennett T. McCallum, 1993. "Macroeconomics After Two Decades of Rational Expectations," NBER Working Papers 4367, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4367
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    File URL: http://www.nber.org/papers/w4367.pdf
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
    3. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    4. Stock, James H & Watson, Mark W, 1988. "Variable Trends in Economic Time Series," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 147-174, Summer.
    5. Kenneth A. Froot & Jeffrey A. Frankel, 1989. "Forward Discount Bias: Is it an Exchange Risk Premium?," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 139-161.
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    7. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
    8. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    9. Evans, Charles L., 1992. "Productivity shocks and real business cycles," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 191-208, April.
    10. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    11. Blanchard, Olivier Jean, 1990. "Why does money affect output? A survey," Handbook of Monetary Economics,in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 15, pages 779-835 Elsevier.
    12. John Y. Campbell & N. Gregory Mankiw, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 857-880.
    13. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    14. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    15. Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-735, September.
    16. Cochrane, John H., 1991. "A critique of the application of unit root tests," Journal of Economic Dynamics and Control, Elsevier, vol. 15(2), pages 275-284, April.
    17. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
    18. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    19. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-775, August.
    20. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, vol. 83(3), pages 416-436, June.
    21. Sowell, Fallaw, 1992. "Modeling long-run behavior with the fractional ARIMA model," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 277-302, April.
    22. Peter K. Clark, 1987. "The Cyclical Component of U. S. Economic Activity," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 797-814.
    23. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
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    Cited by:

    1. Bennett T. McCallum, 1996. "Neoclassical vs. endogenous growth analysis: an overview," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 41-71.
    2. Juan Sebastían Vélez Velásquez, 2008. "Efecto rebaño: Una aproximación para contrastar la hipótesis de expectativas racionales," REVISTA SOCIEDAD Y ECONOMIA - CIDSE, UNIVERSIDAD DEL VALLE - CIDSE, October.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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