Lectures on Behavioral Macroeconomics

Author： De Grauwe Paul  

Publisher： Princeton University Press‎

Publication year： 2012

E-ISBN: 9781400845378

P-ISBN(Paperback): 9780691147390

Subject： F015 宏观经济学

Keyword： 宏观经济管理,宏观经济学,贸易经济

Language： ENG

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Description

In mainstream economics, and particularly in New Keynesian macroeconomics, the booms and busts that characterize capitalism arise because of large external shocks. The combination of these shocks and the slow adjustments of wages and prices by rational agents leads to cyclical movements. In this book, Paul De Grauwe argues for a different macroeconomics model--one that works with an internal explanation of the business cycle and factors in agents' limited cognitive abilities. By creating a behavioral model that is not dependent on the prevailing concept of rationality, De Grauwe is better able to explain the fluctuations of economic activity that are an endemic feature of market economies. This new approach illustrates a richer macroeconomic dynamic that provides for a better understanding of fluctuations in output and inflation.


De Grauwe shows that the behavioral model is driven by self-fulfilling waves of optimism and pessimism, or animal spirits. Booms and busts in economic activity are therefore natural outcomes of a behavioral model. The author uses this to analyze central issues in monetary policies, such as output stabilization, before extending his investigation into asset markets and more sophisticated forecasting rules. He also examines how well the theoretical predictions of the behavioral model perform when confronted with empirical data.


  • Develops a behavioral macroeconomic model that assumes agents have limited cognitive abili

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Contents

Preface

1 A Behavioral Macroeconomic Model

1.1 Introduction

1.2 The Model

1.3 Introducing Heuristics in Forecasting Output

1.4 Heuristics and Selection Mechanism in Forecasting Inflation

1.5 Solving the Model

1.6 Animal Spirits, Learning, and Forgetfulness

1.7 Conditions for Animal Spirits to Arise

1.8 Two Different Business Cycle Theories: Behavioral Model

1.9 Two Different Business Cycle Theories: New Keynesian Model

1.10 Uncertainty and Risk

1.11 Credibility of Inflation Targeting and Animal Spirits

1.12 Different Types of Inertia

1.13 Animal Spirits in the Macroeconomic Literature

1.14 Conclusion

Appendix 1: Parameter Values of the Calibrated Model

Appendix 2: Matlab Code for the Behavioral Model

Appendix 3: Some Thoughts on Methodology in Mainstream Macroeconomics

2 The Transmission of Shocks

2.1 Introduction

2.2 The Transmission of a Positive Productivity Shock

2.3 The Transmission of Interest Rate Shocks

2.4 Fiscal Policy Multipliers: How Much Do We Know?

2.5 Transmission under Perfect Credibility of Inflation Target

3 Trade-offs between Output and Inflation Variability

3.1 Introduction

3.2 Constructing Trade-offs

3.3 Trade-offs in the New Keynesian Rational Expectations (DSGE) Model

3.4 The Merits of Strict Inflation Targeting

4 Flexibility, Animal Spirits, and Stabilization

4.1 Introduction

4.2 Flexibility and Neutrality of Money

4.3 Flexibility and Stabilization

5 Animal Spirits and the Nature of Macroeconomic Shocks

5.1 Introduction

5.2 The Model with Only Supply or Demand Shocks

5.3 Trade-offs in the Supply-Shocks-Only Scenario

5.4 Trade-offs in the Demand-Shocks-Only Scenario

5.5 Conclusion

6 Stock Prices and Monetary Policy

6.1 Introduction

6.2 Introducing Asset Prices in the Behavioral Model

6.3 Simulating the Model

6.4 Should the Central Bank Care about Stock Prices?

6.5 Inflation Targeting and Macroeconomic Stability

6.6 The Trade-off between Output and Inflation Variability

6.7 Conclusion

7 Extensions of the Basic Model

7.1 Fundamentalists Are Biased

7.2 Shocks and Trade-offs

7.3 Further Extensions of the Basic Model

7.4 Conclusion

8 Empirical Issues

8.1 Introduction

8.2 The Correlation of Output Movements and Animal Spirits

8.3 Model Predictions: Higher Moments

8.4 Transmission of Monetary Policy Shocks

8.5 Conclusion

References

Index

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