Last week’s post illustrates why the mainstream New Keynesian journal, American Economic Journal: Macroeconomics, has since its debut in 2009 failed to explain the most important instability evidence. The core problem is that AEJ:M editors assign top priority to defending …
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New Keynesian Wage Rigidity
The most recent American Journal of Economics: Macroeconomics arrived in my in-box last week. My interest was piqued by an article on wage rigidity, “Fixed-Wage Contracts and Monetary Non-Neutrality”, by Maria Björklund, Mikael Carlsson and Oskar Nordström Skans (hereafter BCS). …
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Greg Mankiw and Franco Modigliani
Greg Mankiw has always been a smart guy. As a young man, he took a gap year between his undergraduate and graduate education to be a research assistant at the Congressional Budget Office. He wisely chose the macro unit I …
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The Efficient-Market Hypothesis
Last week’s post outlined the GEM Project’s theory of nonstationary demand disturbances (NDD). It explains the sort of extreme instability that characterized the 2008-09 Great Recession (as well as the 1930s Great Depression). NDD macrodynamics is not understood in the …
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The Efficient-Market Hypothesis Needs Work
Last week’s post outlined the GEM Project’s theory of nonstationary demand disturbances (NDD). It explains the sort of extreme instability that characterized the 2008-09 Great Recession (as well as the 1930s Great Depression). NDD macrodynamics in highly specialized market economies …
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Bare-Bones GEM Stabilization Theory
Heterogeneous Demand Disturbances
In generalized-exchange macroeconomics, featuring microfounded meaningful wage rigidity and the rational suppression of labor-price recontracting, a broad variety of adverse shocks are centrally promulgated by nominal demand disturbances (DD). Stationary demand disturbances are the most common DD class. …
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Downsizing Plus Proper Monetary Policy
As described last week, the stagflation decade was a macroeconomic version of a perfect storm, generating a prolonged period of stubbornly elevated wage/price inflation and unemployment. The global disruption, of course, greatly interested economists. Their contemporaneous work produced a three-part …
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Battling Phillips Curves: Stagflation
As promised last week, this post digs deeper into stagflation decade. The episode of simultaneously high unemployment and inflation that began in the early 1970s was the 20th century’s second most damaging macro crisis, ranking below only the 1930s Great …
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Stanley Fischer’s Bad Influence on New Keynesians
In the 1970s, Robert Lucas famously argued that adaptive expectations left information on the table and, as a result, could not be consistent with optimizing behavior. Lucas’ target was then-mainstream Early Keynesians who used adaptive expectations to motivate catch-up adjustments …
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Michel De Vroey’s Essential Book, Part II
This post continues last week’s admiration of Michel De Vroey. He understands, and confidently champions, the EK emphasis on involuntary unemployment and, consequently, the analytic centrality assigned in stabilization-relevant macro theory to meaningful wage rigidity (MWR) and the discretionary management …
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