By Michel De Vroey

This publication retraces the heritage of macroeconomics from Keynes's normal conception to the current. valuable to it's the distinction among a Keynesian period and a Lucasian - or dynamic stochastic common equilibrium (DSGE) - period, every one governed through detailed methodological criteria. within the Keynesian period, the e-book stories the next theories: Keynesian macroeconomics, monetarism, disequilibrium macroeconomics (Patinkin, Leijongufvud and Clower), non-Walrasian equilibrium versions, and first-generation new Keynesian versions. 3 phases are pointed out within the DSGE period: new classical macroeconomics (Lucas), RBC modelling, and second-generation new Keynesian modeling. The publication additionally examines a couple of chosen works geared toward offering possible choices to Lucasian macroeconomics. whereas now not eschewing analytical content material, Michel De Vroey specializes in substantial tests, and the versions studied are offered in a pedagogical and shiny but serious method.

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Extra info for A History of Macroeconomics

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Nce. Very soon rnacroeconomics became a new and thriving subdiscipline of economics. A product of the Great Depression, its overarching aim was to highlight market failures that could be remedied by state action. So, from the onset, it hada reformist flavor. Unemployment- and in particular involuntary unemployment - was its defining element. 2 Keynesian Macroeconomics: The IS-LM Model Centered on the IS-LM model, Keynesian macroeconomics was the predominant paradigm in macroeconomics from the r 9 sos until the r 970s, when it carne under fire without fully disappearing from the scene.

The nominal wage is one of the ingredients of aggregate supply (wages as a cost) and of aggregate demand (wages as income). ,0 He coined the expression 'effective demand' to refer to the intersection of aggregate demand and aggregate supply. The determination of employment is declared coterminous to that of effective demand. Involuntary unemployment exists as soon as employment falls short of full employment. It results from a deficiency in aggregate demand, the demand for investment goods by firms being lower than the quantity that would ensure full employment.

Two new distinctions must be considered. First a distinction must be drawn between the market and the normal supply and demand functions. Second, two types of normal equilibrium ha ve to be separated: 'short-period normal equilibrium' acting as a center of gravity in a fixedcapital stock context, and 'long-period equilibrium' acting thusly when the capital stock is variable. ' lt is achieved whenever the market-day allocation (temporary equilibrium or the matching of market supply and demand) coincides with the normal allocation (the matching of normal supply and demand).

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