By Michel De Vroey
This booklet retraces the heritage of macroeconomics from Keynes's normal conception to the current. vital to it's the distinction among a Keynesian period and a Lucasian - or dynamic stochastic normal equilibrium (DSGE) - period, each one governed via designated methodological criteria. within the Keynesian period, the e-book experiences the subsequent theories: Keynesian macroeconomics, monetarism, disequilibrium macro (Patinkin, Leijongufvud, and Clower) non-Walrasian equilibrium types, and first-generation new Keynesian types. 3 phases are pointed out within the DSGE period: new classical macro (Lucas), RBC modelling, and second-generation new Keynesian modeling. The booklet additionally examines a number of chosen works geared toward providing possible choices to Lucasian macro. whereas no longer eschewing analytical content material, Michel De Vroey makes a speciality of sizeable checks, and the versions studied are provided in a pedagogical and bright but severe means.
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Additional info for A History of Macroeconomics from Keynes to Lucas and Beyond
Starting from a state of full equilibrium at t0 (point A), a change in normal demand (ND) of a moderate length occurs at t1 (I suppose that market and normal demand coincide). As for supply, a distinction has to be drawn between market supply (MS), which is vertical due to the perishable nature of ﬁsh, and short-period normal supply (NS) expressing ﬁrms’ optimal plan when they can change their output by using more variable capital. The initial result of the change in demand is that at t1 the market equilibrium price rises to the distance 0-p1.
The former are assumed to be relevant for output decisions, and hence for employment, the latter for investment decisions. In this model, it is assumed that both types of expectations are fulﬁlled. The second model departs from the ﬁrst by dropping the assumption that short-period expectations are realized. However, the fulﬁllment of long-period expectations remains assumed. In the last model, short-term expectations and long-term expectations are no longer assumed to be independent from one another.
7 Turning to the issue of how this outcome is reached, 7 Rationing is a case of short-side trading. Take a standard supply and demand graph and draw a horizontal line from the ordinate at the given price. If this lines crosses the supply and demand functions at their intersection, rationing is absent. Otherwise, the ﬁrst function the line intersects is the short side. Although the agents on the short side of the market achieve their desired trade, those on the long side do not and are called rationed.
A History of Macroeconomics from Keynes to Lucas and Beyond by Michel De Vroey