In a recent article (Lawson, 2013), Tony Lawson argues for a Veblenian interpretation of the term “neoclassical”, according to which a neoclassical economist is one whose methodology is at odds with their ontological presuppositions. This leads him to categorize many heterodox economists as neoclassical on the basis that their use of mathematical modeling is at odds with their (implicit) acceptance of an open-systems ontology. The reason is that, according to Lawson, mathematical modeling is deductivist: it presupposes that social systems are closed. The argument advanced in this paper is that this last claim is true only some of the time, and problematic only some of the time that it is true. It therefore amounts to a defense of mathematical modeling by heterodox economists that is, at the same time, sympathetic to Lawson’s claims that the social realm is structured but open and that this ontology is (implicitly) accepted by many heterodox economists.
{"title":"Heterodox Economics, Social Ontology, and the Use of Mathematics","authors":"M. Setterfield","doi":"10.2139/ssrn.2574725","DOIUrl":"https://doi.org/10.2139/ssrn.2574725","url":null,"abstract":"In a recent article (Lawson, 2013), Tony Lawson argues for a Veblenian interpretation of the term “neoclassical”, according to which a neoclassical economist is one whose methodology is at odds with their ontological presuppositions. This leads him to categorize many heterodox economists as neoclassical on the basis that their use of mathematical modeling is at odds with their (implicit) acceptance of an open-systems ontology. The reason is that, according to Lawson, mathematical modeling is deductivist: it presupposes that social systems are closed. The argument advanced in this paper is that this last claim is true only some of the time, and problematic only some of the time that it is true. It therefore amounts to a defense of mathematical modeling by heterodox economists that is, at the same time, sympathetic to Lawson’s claims that the social realm is structured but open and that this ontology is (implicitly) accepted by many heterodox economists.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-03-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131498964","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the literature on his philosophical ideas the correspondence Keynes had with Hugh Townshend over the just-published "General Theory" has attracted significant attention. Excerpts from the exchange have been used as a relevant piece of evidence by scholars who claim that Keynes came to reject rational decision criteria, thus focusing on the necessity for economic agents to form expectations on market sentiment, rather than fundamentals. This note concentrates instead on the whole correspondence and tries to show that a comprehensive reading of the exchange between Keynes and Townshend, unfolding through the years 1936-1938, suggests that its discussion thread was more technical than usually understood. It is argued that the correspondence provides evidence for the fact that Keynes still had a keen interest in a problem left unsolved in the "Treatise on Probability", namely, the definition of an alternative to what he termed «normal ethical theory» in the "Treatise" and identified with «strict mathematical calculation» in the "General Theory". The correspondence reveals that the issue of whether a useful decision rule can be devised under uncertainty still appears central in Keynes’s thought in 1938.
{"title":"Keynes on Probability and Decision: Evidence from the Correspondence with Hugh Townshend","authors":"C. Zappia","doi":"10.2139/ssrn.2612951","DOIUrl":"https://doi.org/10.2139/ssrn.2612951","url":null,"abstract":"In the literature on his philosophical ideas the correspondence Keynes had with Hugh Townshend over the just-published \"General Theory\" has attracted significant attention. Excerpts from the exchange have been used as a relevant piece of evidence by scholars who claim that Keynes came to reject rational decision criteria, thus focusing on the necessity for economic agents to form expectations on market sentiment, rather than fundamentals. This note concentrates instead on the whole correspondence and tries to show that a comprehensive reading of the exchange between Keynes and Townshend, unfolding through the years 1936-1938, suggests that its discussion thread was more technical than usually understood. It is argued that the correspondence provides evidence for the fact that Keynes still had a keen interest in a problem left unsolved in the \"Treatise on Probability\", namely, the definition of an alternative to what he termed «normal ethical theory» in the \"Treatise\" and identified with «strict mathematical calculation» in the \"General Theory\". The correspondence reveals that the issue of whether a useful decision rule can be devised under uncertainty still appears central in Keynes’s thought in 1938.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130171569","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Keynesian intuition that increasing consumption can stimulate investment is verified empirically using US macroeconomic data. The investment multiplier is hypothesized to increase monotonically with the propensity to consume. However, the functional relationship is not that of the Keynesian multiplier, as assumed axiomatically but incorrectly, in standard Keynesian economics. By modelling the investment multiplier as a power function of the consumption propensity, with empirically estimated parameters, we show that there exists an optimal level of aggregate consumption which maximizes national economic growth by balancing aggregate demand and supply in a dynamic equilibrium. For the US economy, the optimal aggregate consumption is estimated to be about 88 percent of the gross domestic product (GDP) over the data period. With the US aggregate consumption propensity already well past the optimal level in recent decades, US government policies to stimulate more consumption to increase economic growth have been counter-productive for several decades.
{"title":"Optimal Aggregate Consumption for Economic Growth","authors":"Wilson N. Sy","doi":"10.2139/ssrn.2544193","DOIUrl":"https://doi.org/10.2139/ssrn.2544193","url":null,"abstract":"The Keynesian intuition that increasing consumption can stimulate investment is verified empirically using US macroeconomic data. The investment multiplier is hypothesized to increase monotonically with the propensity to consume. However, the functional relationship is not that of the Keynesian multiplier, as assumed axiomatically but incorrectly, in standard Keynesian economics. By modelling the investment multiplier as a power function of the consumption propensity, with empirically estimated parameters, we show that there exists an optimal level of aggregate consumption which maximizes national economic growth by balancing aggregate demand and supply in a dynamic equilibrium. For the US economy, the optimal aggregate consumption is estimated to be about 88 percent of the gross domestic product (GDP) over the data period. With the US aggregate consumption propensity already well past the optimal level in recent decades, US government policies to stimulate more consumption to increase economic growth have been counter-productive for several decades.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127197657","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Lawrence R. Klein (1920-2013) played a major role in the construction and in the further dissemination of econometrics from the 1940s. Considered as one of the main developers and practitioners of macroeconometrics, Klein's influence is reflected in his application of econometric modelling " to the analysis of economic fluctuations and economic policies " for which he was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1980. The purpose of this paper is to give an account of Klein's image of econometrics focusing on his early period as an econometrician (1944-1950), and more specifically on his period as a Cowlesman (1944-1947). Independently of how short this period might appear, it contains a set of fundamental publications and events, which were decisive for Klein's conception of econometrics, and which formed Klein's unique way of doing econometrics. At least four features are worth mentioning, which characterise this uniqueness. First, Klein was the only Cowlesman who carried on the macroeconometric programme beyond the 1940s, even if the Cowles had already abandoned it. Second, his pluralistic approach in terms of economic theory allowed him not only to use the Walrasian framework appraised by the Cowles Commission and especially by T.C. Koopmans, but also the Marxian and Keynesian frameworks, enriching the process of model specification and motivating economists of different stripes to make use of the nascent econometrics. Third, Klein differentiated himself from the rigid methodology praised at Cowles; while the latter promoted the use of highly sophisticated methods of estimation, Klein was convinced that institutional reality and economic intuition would contribute more to econometrics than the sophistication of these statistical techniques. Last but not least, Klein never gave up what he thought was the political objective of econometrics: economic planning and social reform.
Lawrence R. Klein(1920-2013)在20世纪40年代以来计量经济学的构建和进一步传播中发挥了重要作用。克莱因被认为是宏观计量经济学的主要开发者和实践者之一，他的影响体现在他将计量经济学模型应用于“经济波动和经济政策的分析”，并因此获得1980年瑞典央行纪念阿尔弗雷德·诺贝尔经济学奖。本文的目的是对克莱因作为计量经济学家的早期(1944-1950)，更具体地说，是他作为考勒斯曼(1944-1947)时期的计量经济学形象进行描述。不管这段时间有多短，它包含了一系列基本的出版物和事件，这些出版物和事件对克莱因的计量经济学概念起了决定性作用，并形成了克莱因独特的计量经济学方法。至少有四个特征值得一提，它们体现了这种独特性。首先，克莱因是唯一一个在20世纪40年代以后继续推行宏观计量经济学计划的考勒斯曼人，尽管考勒斯夫妇已经放弃了这个计划。其次，他在经济理论方面的多元化方法使他不仅使用了考尔斯委员会特别是T.C.库普曼斯评价的瓦尔拉斯框架，而且还使用了马克思主义和凯恩斯主义框架，丰富了模型规范的过程，激励了不同流派的经济学家利用新兴的计量经济学。第三，克莱因将自己与考尔斯所推崇的僵化方法论区别开来;虽然后者提倡使用高度复杂的估计方法，但克莱因确信，制度现实和经济直觉比这些复杂的统计技术对计量经济学的贡献更大。最后但并非最不重要的一点是，克莱因从未放弃他所认为的计量经济学的政治目标:经济计划和社会改革。
{"title":"Econometrics as a Pluralistic Scientific Tool for Economic Planning: On Lawrence R. Klein's Econometrics","authors":"Erich Pinzón-Fuchs","doi":"10.2139/ssrn.2832406","DOIUrl":"https://doi.org/10.2139/ssrn.2832406","url":null,"abstract":"Lawrence R. Klein (1920-2013) played a major role in the construction and in the further dissemination of econometrics from the 1940s. Considered as one of the main developers and practitioners of macroeconometrics, Klein's influence is reflected in his application of econometric modelling \" to the analysis of economic fluctuations and economic policies \" for which he was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1980. The purpose of this paper is to give an account of Klein's image of econometrics focusing on his early period as an econometrician (1944-1950), and more specifically on his period as a Cowlesman (1944-1947). Independently of how short this period might appear, it contains a set of fundamental publications and events, which were decisive for Klein's conception of econometrics, and which formed Klein's unique way of doing econometrics. At least four features are worth mentioning, which characterise this uniqueness. First, Klein was the only Cowlesman who carried on the macroeconometric programme beyond the 1940s, even if the Cowles had already abandoned it. Second, his pluralistic approach in terms of economic theory allowed him not only to use the Walrasian framework appraised by the Cowles Commission and especially by T.C. Koopmans, but also the Marxian and Keynesian frameworks, enriching the process of model specification and motivating economists of different stripes to make use of the nascent econometrics. Third, Klein differentiated himself from the rigid methodology praised at Cowles; while the latter promoted the use of highly sophisticated methods of estimation, Klein was convinced that institutional reality and economic intuition would contribute more to econometrics than the sophistication of these statistical techniques. Last but not least, Klein never gave up what he thought was the political objective of econometrics: economic planning and social reform.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"66 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117007038","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We construct experimental economies, populated with human subjects, with a structure based on a nonlinear version of the New Keynesian dynamic stochastic general equilibrium (DSGE) model. We analyze the behavior of firms’ pricing decisions in four different experimental economies. We consider how well the experimental data conform to a number of accepted empirical stylized facts. Pricing patterns mostly conform to these patterns. Most price changes are positive, and inflation is strongly correlated with average magnitude, but not the frequency, of price changes. Prices are affected negatively by the productivity shock and positively by the output gap. Lagged real interest rate has a negative effect on prices, unless human subjects choose the interest rate, or firms sell perfect substitutes in the output market. There is inertia in price setting, firms integrate wage increases into their prices, and there is evidence of adaptive behavior in price-setting in our laboratory economy. The hazard function for price changes, however, is upward-sloping, in contrast to most empirical studies.
{"title":"Pricing Decisions in an Experimental Dynamic Stochastic General Equilibrium Economy","authors":"C. Noussair, D. Pfajfar, Janos Zsiros","doi":"10.2139/ssrn.2529186","DOIUrl":"https://doi.org/10.2139/ssrn.2529186","url":null,"abstract":"We construct experimental economies, populated with human subjects, with a structure based on a nonlinear version of the New Keynesian dynamic stochastic general equilibrium (DSGE) model. We analyze the behavior of firms’ pricing decisions in four different experimental economies. We consider how well the experimental data conform to a number of accepted empirical stylized facts. Pricing patterns mostly conform to these patterns. Most price changes are positive, and inflation is strongly correlated with average magnitude, but not the frequency, of price changes. Prices are affected negatively by the productivity shock and positively by the output gap. Lagged real interest rate has a negative effect on prices, unless human subjects choose the interest rate, or firms sell perfect substitutes in the output market. There is inertia in price setting, firms integrate wage increases into their prices, and there is evidence of adaptive behavior in price-setting in our laboratory economy. The hazard function for price changes, however, is upward-sloping, in contrast to most empirical studies.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128823695","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper are outlined some new-Keynesian economic models along with their micro foundations. At first small model of interest rate consumption income and savings has been outlined. Modigliani-Miller model follows as one of the five neutralities in macroeconomics, and demand for money by Miller and Orr. Also Baumol-Tobin models with its extensions by Jovanovic and Romer has been subject to investigation. Issues in monetary policy such as printing money and government revenues of printing money are been subject to discussion too. In the last section Diamond-Dybvig model on bank runs is being outlined.
{"title":"New-Keynesian Economics Tales with Algebraic Notations","authors":"Dushko Josheski","doi":"10.2139/ssrn.2416570","DOIUrl":"https://doi.org/10.2139/ssrn.2416570","url":null,"abstract":"In this paper are outlined some new-Keynesian economic models along with their micro foundations. At first small model of interest rate consumption income and savings has been outlined. Modigliani-Miller model follows as one of the five neutralities in macroeconomics, and demand for money by Miller and Orr. Also Baumol-Tobin models with its extensions by Jovanovic and Romer has been subject to investigation. Issues in monetary policy such as printing money and government revenues of printing money are been subject to discussion too. In the last section Diamond-Dybvig model on bank runs is being outlined.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"149 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123188612","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Markov-switching rational expectations (MSRE) models can bring out fresh insights beyond what linear rational expectations (RE) models have done for macroeconomics as Davig and Leeper (2007) and Farmer, Waggoner and Zha (2009), among others, have noted and predicted. A lack of tractable methodological foundations, however, may have hindered researchers from uncovering the salient features of MSRE models. This paper improves the status quo to a level at which MSRE - inherently non-linear - models can be analyzed as easily and comprehensively as linear RE models. Specically, we provide a solution method, determinacy conditions, and an economic solution renement and completely characterize the set of RE equilibria for general MSRE models under determinacy and indeterminacy in the mean-square stability sense. These tasks are accomplished by simply solving a model forward and imposing the no-bubble condition for fundamental solutions. We apply our methodology to a New-Keynesian model subject to regime-switching in monetary policy and nd some unforeseen but intuitive determinacy results. Markov-switching in the private sector is also shown to deliver potentially rich dynamics.
{"title":"Characterizing Markov-Switching Rational Expectations Models","authors":"Seonghoon Cho","doi":"10.2139/ssrn.1468331","DOIUrl":"https://doi.org/10.2139/ssrn.1468331","url":null,"abstract":"Markov-switching rational expectations (MSRE) models can bring out fresh insights beyond what linear rational expectations (RE) models have done for macroeconomics as Davig and Leeper (2007) and Farmer, Waggoner and Zha (2009), among others, have noted and predicted. A lack of tractable methodological foundations, however, may have hindered researchers from uncovering the salient features of MSRE models. This paper improves the status quo to a level at which MSRE - inherently non-linear - models can be analyzed as easily and comprehensively as linear RE models. Specically, we provide a solution method, determinacy conditions, and an economic solution renement and completely characterize the set of RE equilibria for general MSRE models under determinacy and indeterminacy in the mean-square stability sense. These tasks are accomplished by simply solving a model forward and imposing the no-bubble condition for fundamental solutions. We apply our methodology to a New-Keynesian model subject to regime-switching in monetary policy and nd some unforeseen but intuitive determinacy results. Markov-switching in the private sector is also shown to deliver potentially rich dynamics.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"45 2","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-01-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131589480","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
By introducing external consumption habits and Limited Asset Market Participation in an otherwise standard New Keynesian DSGE model we uncover a causality link between limited asset market participation, consumption inequality and macroeconomic volatility. We also obtain that monetary contractions have redistributive effects in favour of asset holders, broadly confirming the findings in Coibion et al. (2012). Finally we analyze the impact of redistributive fiscal policies that target consumption inequality between households groups. Such policies have beneficial implications for macroeconomic stability, bringing the dynamic performance of the model close to the one generated by representative-agent DSGE models.
{"title":"Limited Asset Market Participation, Income Inequality and Macroeconomic Volatility","authors":"Giorgio Motta, P. Tirelli","doi":"10.2139/ssrn.2369159","DOIUrl":"https://doi.org/10.2139/ssrn.2369159","url":null,"abstract":"By introducing external consumption habits and Limited Asset Market Participation in an otherwise standard New Keynesian DSGE model we uncover a causality link between limited asset market participation, consumption inequality and macroeconomic volatility. We also obtain that monetary contractions have redistributive effects in favour of asset holders, broadly confirming the findings in Coibion et al. (2012). Finally we analyze the impact of redistributive fiscal policies that target consumption inequality between households groups. Such policies have beneficial implications for macroeconomic stability, bringing the dynamic performance of the model close to the one generated by representative-agent DSGE models.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122893294","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This chapter develops a New Keynesian model to examine a theoretical global economy with two basic macroeconomic components: an energy producer and an energy consumer. (From now on in this chapter whenever we refer to the “energy” or “energy prices”, we refer to “crude oil” and “crude oil price”, which is the main source of energy.) This simple economy uses these two components to evaluate how oil prices affect the consumer economy’s gross domestic product and inflation from 1960 to 2011. This model assumes that changes in the oil price transfer to macro variables through either supply (aggregate supply curve) or demand channels (aggregate demand curve). In order to examine the effects of this transfer, an IS curve is used to look at the demand side and a Phillips curve is used to analyze inflationary effects from the supply side. The empirical analysis concludes that movements in the oil price mainly affect the economy through the demand side (shifting the aggregate demand curve) by affecting household expenditures and energy consumption. This analysis provides several additional findings, among which is that easy monetary policies amplify energy demand more than supply, resulting in skyrocketing crude oil prices, which inhibit economic growth.
{"title":"Which Side of the Economy Is Affected More by Oil Prices: Supply or Demand?","authors":"Farhad Taghizadeh‐Hesary, N. Yoshino","doi":"10.2139/ssrn.2333991","DOIUrl":"https://doi.org/10.2139/ssrn.2333991","url":null,"abstract":"This chapter develops a New Keynesian model to examine a theoretical global economy with two basic macroeconomic components: an energy producer and an energy consumer. (From now on in this chapter whenever we refer to the “energy” or “energy prices”, we refer to “crude oil” and “crude oil price”, which is the main source of energy.) This simple economy uses these two components to evaluate how oil prices affect the consumer economy’s gross domestic product and inflation from 1960 to 2011. This model assumes that changes in the oil price transfer to macro variables through either supply (aggregate supply curve) or demand channels (aggregate demand curve). In order to examine the effects of this transfer, an IS curve is used to look at the demand side and a Phillips curve is used to analyze inflationary effects from the supply side. The empirical analysis concludes that movements in the oil price mainly affect the economy through the demand side (shifting the aggregate demand curve) by affecting household expenditures and energy consumption. This analysis provides several additional findings, among which is that easy monetary policies amplify energy demand more than supply, resulting in skyrocketing crude oil prices, which inhibit economic growth.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133271452","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies the dynamic behavior of an economy under different environmental policy regimes in a New Keynesian model with nominal and real uncertainty. We find the following results: (i) an emissions cap policy is likely to dampen macroeconomic fluctuations; (ii) staggered price adjustment alters significantly the performance of the environmental policy regime put in place; (iii) the optimal environmental policy response to shocks is strongly influenced by the degree to which prices adjust and by the monetary policy reaction.
{"title":"Environmental Policy and Macroeconomic Dynamics in a New Keynesian Model","authors":"Barbara Annicchiarico, F. Di Dio","doi":"10.2139/ssrn.2332124","DOIUrl":"https://doi.org/10.2139/ssrn.2332124","url":null,"abstract":"This paper studies the dynamic behavior of an economy under different environmental policy regimes in a New Keynesian model with nominal and real uncertainty. We find the following results: (i) an emissions cap policy is likely to dampen macroeconomic fluctuations; (ii) staggered price adjustment alters significantly the performance of the environmental policy regime put in place; (iii) the optimal environmental policy response to shocks is strongly influenced by the degree to which prices adjust and by the monetary policy reaction.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"78 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126165086","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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