Macroeconomics of Self-fulfilling Prophecies / Edition 2

Macroeconomics of Self-fulfilling Prophecies / Edition 2

by Roger E. A. Farmer
     
 

ISBN-10: 0262062038

ISBN-13: 9780262062039

Pub. Date: 06/25/1999

Publisher: MIT Press

For many years it was fashionable to treat macroeconomics and microeconomics as separate subjects without looking too deeply at the relationship between the two. But in the 1970s there occurred an episode of high inflation and high unemployment, which was inconsistent with orthodox theory. As a result,macroeconomists began to pay much greater attention to the

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Overview

For many years it was fashionable to treat macroeconomics and microeconomics as separate subjects without looking too deeply at the relationship between the two. But in the 1970s there occurred an episode of high inflation and high unemployment, which was inconsistent with orthodox theory. As a result,macroeconomists began to pay much greater attention to the microfoundations of their subject.

In this book Roger E. A. Farmer takes a somewhat controversial point of view, arguing for the future of macroeconomics as a branch of applied general equilibrium theory. His main theme is that macroeconomics is best viewed as the study of equilibrium environments in which the welfare theorems break down. This approach makes it possible to discuss the role of government policies in a context in which policy may serve some purpose.

Since the publication of the first edition in 1993, self-fulfilling prophecies has become a major competitor to the real business-cycle view of economic fluctuations. The second edition has been updated in three ways: (1) problems are included at the end of every chapter, and a study guide containing sample answers to all of the problems is available; (2) a new chapter discusses research from the past five years on business fluctuations in multisector models; and (3) the chapter on representative agent growth models now includes an appendix that explains the transversality condition.

Product Details

ISBN-13:
9780262062039
Publisher:
MIT Press
Publication date:
06/25/1999
Edition description:
second edition
Pages:
318
Product dimensions:
6.25(w) x 9.00(h) x 1.00(d)
Age Range:
18 Years

Table of Contents

Preface to Second Edition
1 Introduction
1.1 Equilibrium Theory as an Approach to Macroeconomics
1.2 Preview of the Argument
1.3 EXample
1.4 Concluding Remarks
1.5 Problems
2 Linear Difference Equations: Part 1
2.1 Introduction
2.2 Linearizing Nonlinear Models
2.3 Solving FirstOrder Linear Models
2.4 Solving HigherOrder Linear Models
2.5 Concluding Remarks
Problems
3 Linear Difference Equations: Part 2
3.1 Introduction
3.2 Linear Rational EXpectations Models
3.3 Solving Linear Rational EXpectations Models
3.4 Crossequation Restrictions and the Lucas Critique
3.5 Concluding Remarks
3.6 Problems
4 General Equilibrium Theory under Certainty
4.1 Introduction
4.2 Idea of Equilibrium
4.3 Theory of Consumer Choice
4.4 EXcess Demand Functions
4.5 Equilibria and Their Properties
4.6 General Equilibrium Theory and Efficient Allocations of
Resources
4.7 Concluding Remarks
4.8 Problems
5 Infinite Horizon Economies and Representative
Agents
5.1 Introduction
5.2 Representative Agent Economy
5.3 Competitive Equilibrium and the Planner's Problem
5.4 Using the Representative Agent Model to EXplain Time Series
Data
5.5 Concluding Remarks
5.6 AppendiX: Transversality Condition
5.7 Problems
6 Infinite Horizon Economies and Overlapping
Generations
6.1 Introduction
6.2 Structure of the Overlapping Generations Economy
6.3 Consumer's Problem
6.4 EXample of a Pareto Inferior Equilibrium
6.5 Institutions that May Improve Allocations
6.6 Set of Equilibria in the Overlapping Generations Model
6.7 Some Questions about the Model
6.8 More General EXamples of OverlappingGenerations Economies
6.9 Concluding Remarks
6.10 Problems
7 Infinite Horizon Economies with NonconveXities
7.1 Introduction
7.2 Growth Model with Increasing Returns
7.3 Empirical Evidence for Increasing Returns
7.4 Equilibria in the Increasing Returns Economy
7.5 Comparing the Theoretical Properties of RA and IR Models
7.6 Comparing Some Empirical Predictions of RA and IR Models
7.7 Concluding Remarks
7.8 Problems
8 Some Recent Developments
8.1 Introduction
8.2 New Evidence against Big Increasing Returns
8.3 Nonseparable Preferences
8.4 TwoSector Models
8.5 Concluding Remarks
8.6 Problems
9 General Equilibrium Theory and Uncertainty
9.1 Introduction
9.2 Debreu's Formulation of the Problem
9.3 Arrow's Formulation of the Problem
9.4 Infinite Horizon Economies with Uncertainty
9.5 Concluding Remarks
9.6 Problems
10 Sunspots
10.1 Introduction
10.2 Do Sunspots Matter?
10.3 EXample of a Macroeconomic Model Where Sunspots Matter
10.4 Concluding Remarks
10.5 Problems
11 Macroeconomic Models of Money
11.1 Introduction
11.2 Models of Money
11.3 Dynamics of a CashinAdvance Model
11.4 Equilibrium under Interest Rate Control
11.5 Equilibrium under a FiXed Money Growth Rate Rule
11.6 Concluding Remarks
11.7 Problems
12 Applied Monetary Theory
12.1 Introduction
12.2 Monetary Facts: What There Is to EXplain
12.3 Simple Monetary Model: Using Equilibrium Theory to EXplain
the Facts
12.4 How Do Equilibria Behave?
12.5 Concluding Remarks
12.6 Problems
Notes
Bibliography
IndeX

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