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on Post Keynesian Economics |
| By: | Wynne Godley; Dimitri B. Papadimitriou; Gennaro Zezza |
| Abstract: | he collapse in the subprime mortgage market, along with multiple signals of distress in the broader housing market, has already drawn forth a large body of comment. Some people think the upheaval will turn out to be contagious, causing a major slowdown or even a recession later in 2007. Others believe that the turmoil will be contained, and that the U.S. economy will recover quite rapidly and resume the steady growth it has enjoyed during the last four years or so. Yet no participants in the public discussion, so far as we know, have framed their views in the context of a formal model that enables them to draw well-argued conclusions (however conditional) about the magnitude and timing of the impact of recent events on the overall economy in the medium termÑnot just the next few months. |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levysa:sa_apr_07&r=pke |
| By: | Jean-Claude Thoenig (DRM - Dauphine Recherches en Management - [CNRS : UMR7088] - [Université Paris Dauphine - Paris IX]) |
| Abstract: | Public institutions are organized configurations which are prone to institutionalization processes. They reflect as well as produce and diffuse valuues, norms, cognitions, meanings and identities about life and evolution of society, polity or economy. The text covers a set of theories which share a strong Verstehen perspective: historical institutionalism, sociological institutionalism, new institutionalism, and local order institutionalism. It presents their main hypotheses, their analytical methods, and most relevant findings. The empirical facets of such theories question the relevance or normative theories wich prescribe so-called rational or scientific solutions deducted from very abstracts axioms |
| Keywords: | institutionalism; path dependence; new institutionalism; change; norms |
| Date: | 2007–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00139954_v1&r=pke |
| By: | Athanasios Orphanides; John C. Williams |
| Abstract: | We examine the performance and robustness properties of monetary policy rules in an estimated macroeconomic model in which the economy undergoes structural change and where private agents and the central bank possess imperfect knowledge about the true structure of the economy. Policymakers follow an interest rate rule aiming to maintain price stability and to minimize fluctuations of unemployment around its natural rate but are uncertain about the economy's natural rates of interest and unemployment and how private agents form expectations. In particular, we consider two models of expectations formation: rational expectations and learning. We show that in this environment the ability to stabilize the real side of the economy is significantly reduced relative to an economy under rational expectations with perfect knowledge. Furthermore, policies that would be optimal under perfect knowledge can perform very poorly if knowledge is imperfect. Efficient policies that take account of private learning and misperceptions of natural rates call for greater policy inertia, a more aggressive response to inflation, and a smaller response to the perceived unemployment gap than would be optimal if everyone had perfect knowledge of the economy. We show that such policies are quite robust to potential misspecification of private sector learning and the magnitude of variation in natural rates. |
| Keywords: | Monetary policy |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2007-08&r=pke |