|
|
|
|
||||
|
||||
Booms and Busts: New Keynesian and Behavioral ExplanationsPaul De GrauweLondon School of Economics & Political Science (LSE); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR) December 30, 2010 CESifo Working Paper Series No. 3293 Abstract: Capitalism is characterized by booms and busts. Periods of strong growth in output alternate with periods of declines in economic growth. Every macro-economic theory should attempt to explain these endemic business cycle movements. In this paper I present two paradigms that attempt to explain these booms and busts. One is the DSGE-paradigm in which agents have unlimited cognitive abilities. The other paradigm is a behavioural one in which agents are assumed to have limited cognitive abilities. These two types of models produce a radically different macroeconomic dynamics. I analyze these differences. I also study the different policy implications of these two paradigms.
Number of Pages in PDF File: 38 Keywords: DSGE-model, imperfect information, heuristics, animal spirits JEL Classification: E10, E32, D83 working papers seriesDate posted: January 14, 2011Suggested CitationContact Information
|
|
||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo7 in 0.500 seconds
