A Better Liquidity Trap

Its puzzling why the Keynesian liquidity trap is so broadly used in the design of stabilization policy. The evidence shows that interest rates exert, relative to expectations of nonstationary profits, minor influence on business investment decisions. Moreover, even the minor … 
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David Romer in What Have We Learned?

The proliferation of books in which leading economists offer advice on how best to respond to the Great Recession provides snapshots of the current state of macroeconomics. Of particular interest to the GEM Project is the star-studded 2014 IMF collection, … 
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What To Do About the Fed Toolkit?

Historians of the 1913 Federal Reserve Act should find out who was most responsible for Section 13(3), giving the central bank authority to lend broadly in “unusual and exigent circumstances”. The person is a hero. 13(3) provided the legal basis … 
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Mitt Romney on the Great Recession

In 2011, Mitt Romney’s Presidential campaign was asked what immediate actions he would have taken to deal with the 2008-09 economic crisis. The response was ripped from the Real Business Cycle playbook: “Lowering the corporate tax rate. Enacting a permanent … 
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Extreme Instability and Alphabet Soup

This is the third in a series of blogs that explore policymaking implications of the GEM Project’s generalization of rational, price-mediated exchange. It examines, with admiration, the massive Federal Reserve effort to use its balance sheet to counterbalance the increasing … 
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Advances in Aggregate Demand

 

The GEM Project’s key contribution to stabilization-relevant macroeconomics is its derivation of meaningful wage rigidity, capable of rationally suppressing wage recontracting, from axiomatic first principles. MWR enables the reconstruction of aggregate supply to better reflect the highly-specialized, large-scale production of … 
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Preventing Another Great Recession

The GEM Project, by intuitively generalizing rational exchange, has considerably strengthened our capacity to model macro instability. This post begins a series of essays on the policy implications of that breakthrough, with special attention to how best to deal with … 
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Employment Volatility Revisited

The most embarrassing puzzle in modern macroeconomics is no secret. Total hours worked vary a lot over the business cycle while wages move hardly at all. Everybody knows that reconciling those two facts overburdens the consensus market-centric DSGE model class. … 
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Victory for the Chicago School

In this post I make a perhaps startling claim for the GEM Project. Its two-venue general-equilibrium (TVGE) model class is more consistent with the famous Chicago-School credo than is the coherent market-centric DSGE theory that occupies the modern mainstream. From … 
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