Search and Stochastic Dynamics in the Old Keynesian Economics: A Rationale for the Shimer Puzzle

2011

RGC

Self Cite

This paper aims at providing a critical assessment of the new 'Farmerian' economics, i.e. the recent Farmer's attempt to provide a new micro-foundation of the General Theory grounded on modern search and business cycle theories. Specifically, I develop a theoretical model that summarizes the main arguments of the suggested approach by showing that a special importance has to be attached to the search mechanism, the choice of units and 'animal spirits' modelling. Thereafter, referring to self-made real-business-cycle experiments, I discuss the main empirical implications of the resulting framework. Finally, I consider its policy implications by stressing the problematic nature of demand management interventions and the advisability of extending the role of the central bank in preventing financial bubbles and crashes.

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confidence: 99%

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confidence: 99%

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confidence: 99%

See 3 more Smart Citations

Expectations, employment and prices: A suggested interpretation of the new ‘Farmerian’ economics

2011

RGC

Self Cite

The Keynesian nexus between the market for goods and the labour market

2023

Int Rev Econ

Self Cite

In this paper, I build on the Keynesian analysis of the market for goods to draw some implications on the dynamic behaviour of some typical labour market indicators. Specifically, focusing on real magnitudes and distinguishing between the aggregate expected demand function and the aggregate expenditure function, I discuss the implied “daily” adjustments of expected and actual real wages that allow to achieve a short-run equilibrium. In addition, in order to show that the suggested picture of market for goods does not require a distinct setting to describe the transactions of labour services, I offer a rationale for equilibrium unemployment due to deficient demand grounded on the searching-and-matching theory.

Animal spirits, investment and unemployment: An old Keynesian view of the Great Recession

2015

EconomiA

This paper develops a DSGE model with investment and capital accumulation build along demand-driven explanations of the Great Recession. Specifically, following Farmer (2013), I set forth a search framework in which households decide about consumption while firms decide about recruiting effort as well as investment. This setting closed with market clearing in good and asset markets has one less equation than unknowns. As a consequence, in order to solve such an indeterminacy, I assume that investment is driven by self-fulfilling expectations about the adjustment cost of capital. Consistently with the view of business cycles pushed by stock price fluctuations, this model has the potential to provide a more comprehensive rationale for the consumption–investment patterns observed during the years of the crisis