The Development of Keynesian Macroeconomics

14 Pages Posted: 21 Mar 2007

See all articles by Bennett T. McCallum

Bennett T. McCallum

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

Date Written: February 1987

Abstract

This paper provides an outline of the historical development of Keynesian macroeconomics. It first argues that the business-cycle model of J.M. Keynes's General Theory featured analytical ingredients that were present in earlier writings and attained its theoretical precision only in contributions made later. Remaining sections of the paper focus on the key characteristic of Keynesian theory, namely, a postulated stickiness of nominal prices that enables aggregate demand to play a greater role in output determination than it does in flexible-price classical analysis. Three approaches that have been historically important are ones relying upon (i) equilibria conditional on given prices, (i ) algebraic Phillips-type price adjustment relations, and (iii) equilibrium analysis 'with incomplete information. The paper reviews difficulties with each of these and concludes with a discussion of relevant issues of today.

Suggested Citation

McCallum, Bennett T., The Development of Keynesian Macroeconomics (February 1987). NBER Working Paper No. w2156. Available at SSRN: https://ssrn.com/abstract=975459

Bennett T. McCallum (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

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