IDEAS home Printed from https://ideas.repec.org/p/uic/wpaper/0312.html
   My bibliography  Save this paper

Is it Possible to Go Back to Ad Hoc Macroeconomic Models? The Case of the Romer-Taylor Model

Author

Listed:
  • Alejandro Rodríguez Arana

    (Department of Economics, Universidad Iberoamericana, Mexico City. Mexico)

Abstract

In absence of fiscal stabilizing rules, the original Romer-Taylor model is unstable in the issuing of government bonds. Adding a wealth effect to the consumption function seems reasonable to provide rationality to the consumers, but that destabilize even more the Romer-Taylor’s framework. A fiscal stabilizing rule, where there is a tax on the wealth effect for consumers, may stabilize output, inflation and the government budget constraint in the long run. In this context, the renewed Romer-Taylor model constitutes a good instrument to provide policy prescriptions.

Suggested Citation

  • Alejandro Rodríguez Arana, 2012. "Is it Possible to Go Back to Ad Hoc Macroeconomic Models? The Case of the Romer-Taylor Model," Working Papers 0312, Universidad Iberoamericana, Department of Economics.
    • Handle: RePEc:uic:wpaper:0312
    as

    Download full text from publisher

    File URL: http://iberoeconomia.mx/images/stories/The_Case_of_the_Romer-Taylor_Model.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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..
    2. John B. Taylor, 2000. "Teaching Modern Macroeconomics at the Principles Level," American Economic Review, American Economic Association, vol. 90(2), pages 90-94, May.
    3. Laidler, David, 2006. "Woodford and Wicksell on Interest and Prices: The Place of the Pure Credit Economy in the Theory of Monetary Policy," Journal of the History of Economic Thought, Cambridge University Press, vol. 28(2), pages 151-159, June.
    4. Solow, Robert M, 1997. "Is There a Core of Usable Macroeconomics We Should All Believe In?," American Economic Review, American Economic Association, vol. 87(2), pages 230-232, May.
    5. McCallum, Bennett T & Nelson, Edward, 1999. "An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 296-316, August.
    6. Michael Woodford, 2001. "The Taylor Rule and Optimal Monetary Policy," American Economic Review, American Economic Association, vol. 91(2), pages 232-237, May.
    7. Willem H. Buiter, 1990. "Principles of Budgetary and Financial Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524139, April.
    8. Buiter, Willem, 2009. "The unfortunate uselessness of most ’state of the art’ academic monetary economics," MPRA Paper 58407, University Library of Munich, Germany, revised 06 Mar 2009.
    9. Olivier Blanchard, 2009. "The State of Macro," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 209-228, May.
    10. Buiter, Willem H., 1982. "Predetermined and non-predetermined variables in rational expectations models," Economics Letters, Elsevier, vol. 10(1-2), pages 49-54.
    11. Robert G. King, 1993. "Will the New Keynesian Macroeconomics Resurrect the IS-LM Model?," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 67-82, Winter.
    12. James Tobin & Willem H. Buiter, 1974. "Long Run Effects of Fiscal and Monetary Policy on Aggregate Demand," Cowles Foundation Discussion Papers 384, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    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. Alejandro Rodríguez Arana, 2014. "Staggered prices, the optimizing taylor rule and the irrelevance of the is curve," Working Papers 0714, Universidad Iberoamericana, Department of Economics.
    2. Alejandro Rodríguez Arana, 2014. "The relationship between the variance of inflation and the variance of output under different types of monetary policy," Working Papers 0814, Universidad Iberoamericana, Department of Economics.
    3. repec:hal:spmain:info:hdl:2441/5221 is not listed on IDEAS
    4. David Staines, 2023. "Stochastic Equilibrium the Lucas Critique and Keynesian Economics," Papers 2312.16214, arXiv.org, revised Jun 2024.
    5. repec:spo:wpmain:info:hdl:2441/5221 is not listed on IDEAS
    6. Edward Nelson, 2004. "Money and the Transmission Mechanism in the Optimizing IS-LM Specification," History of Political Economy, Duke University Press, vol. 36(5), pages 271-304, Supplemen.
    7. 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.
    8. Ronny Mazzocchi, 2013. "Investment-Saving Imbalances with Endogenous Capital Stock," DEM Discussion Papers 2013/14, Department of Economics and Management.
    9. Rodolfo Cermeño & F. Alejandro Villagómez & Javier Orellana Polo, 2012. "Monetary policy rules in a small open economy: an application to Mexico :," Journal of Applied Economics, Universidad del CEMA, vol. 15, pages 259-286, November.
    10. Evan F. Koenig, 2008. "Keynesian economics without the LM and IS curves: a dynamic generalization of the Taylor-Romer model," Working Papers 0813, Federal Reserve Bank of Dallas.
    11. Pedro Garcia Duarte & Gilberto Tadeu Lima, 2012. "Microfoundations Reconsidered," Books, Edward Elgar Publishing, number 14869.
    12. Rodolfo Cermeño & F. Alejandro Villagómez & Javier Orellana Polo, 2012. "Monetary policy rules in a small open economy: an application to Mexico :," Journal of Applied Economics, Universidad del CEMA, vol. 15, pages 259-286, November.
    13. Ludger Linnemann, 2004. "Tax Base and Crowding‐in Effects of Balanced Budget Fiscal Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 273-297, June.
    14. Bruckner, Matthias & Schabert, Andreas, 2006. "Can money matter for interest rate policy?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2823-2857, December.
    15. Piotr Krajewski, 2017. "Czy szacując efekty polityki makroekonomicznej należy uwzględniać perspektywę planowania gospodarstw domowych?," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 39-61.
    16. Buiter, Willem H., 2007. "Seigniorage," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-49.
    17. Beckenbach, Frank, 2019. "Monism in modern science: The case of (micro-)economics," Working Paper Serie des Instituts für Ökonomie Ök-49, Hochschule für Gesellschaftsgestaltung (HfGG), Institut für Ökonomie.
    18. Athreya, Kartik B., 2014. "Big Ideas in Macroeconomics: A Nontechnical View," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262019736, April.
    19. Giese, Guido & Wagner, Helmut, 2009. "A New Keynesian Model with Endogenous Frictions," Discussion Paper Series a520, Institute of Economic Research, Hitotsubashi University.
    20. Annicchiarico, Barbara & Giammarioli, Nicola & Piergallini, Alessandro, 2012. "Budgetary policies in a DSGE model with finite horizons," Research in Economics, Elsevier, vol. 66(2), pages 111-130.
    21. Giammarioli, Nicola & Annicchiarico, Barbara & Piergallini, Alessandro, 2006. "Fiscal policy in a monetary economy with capital and finite lifetime," Working Paper Series 661, European Central Bank.
    22. Xiao, Wei, 2008. "Increasing Returns And The Design Of Interest Rate Rules," Macroeconomic Dynamics, Cambridge University Press, vol. 12(1), pages 22-49, February.

    More about this item

    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:uic:wpaper:0312. 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: Alejandra Villegas (email available below). General contact details of provider: https://edirc.repec.org/data/eduiamx.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.