From Real Business Cycle and New Keynesian to DSGE Macroeconomics: Facts and Models in the Emergence of a Consensus
39 Pages Posted: 21 Apr 2015
Date Written: April 10, 2015
Macroeconomists have emphasized the force of facts in forging a consensus understanding of business cycle fluctuations. According to this view, rival economists could not longer hold disparate views on the topic because "facts have a way of not going away" (Blanchard 2009). But how can macroeconomists observe the workings of an economy? Essentially through building and manipulating models. Thus the construction of macroeconomic facts – or "stylized facts" – empirical regularities that come to be widely accepted, opens up technical spaces where macroeconomists negotiated their theoretical commitments and eventually allowed a consensus to emerge. I argue that this is an important element in the history of the DSGE macroeconomics.
Keywords: history of macroeconomics, DSGE models, new Keynesian macroeconomics, real business cycles
JEL Classification: B22, B23, E32
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