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Economic Choices
ECONOMIC CHOICES Daniel McFadden* This Nobel lecture discusses the microeconometric analysis of choice behavior of consumers who face discrete economic alternatives. Before the 1960's, economists used consumer theory mostly as a logical tool, to explore conceptually the properties of alternative market organizations and economic policies. When the theory was applied empirically, it was to market-level or national-accounts-level data. In these applications, the theory was usually developed in terms of a representative agent, with market-level behavior given by the representative agent’s behavior writ large. When observations deviated from those implied by the representative agent theory, these differences were swept into an additive disturbance and attributed to data measurement errors, rather than to unobserved factors within or across individual agents. In statistical language, traditional consumer theory placed structural restrictions on mean behavior, but the distribution of responses about their mean was not tied to the theory. In the 1960's, rapidly increasing availability of survey data on individual behavior, and the advent of digital computers that could analyze these data, focused attention on the variations in demand across individuals. It became important to explain and model these variations as part of consumer theory, rather than as ad hoc disturbances. This was particularly obvious for discrete choices, such as transportation mode or occupation. The solution to this problem has led to the tools we have today for microeconometric analysis of choice behavior. I will first give a brief history of the development of this subject, and place my own contributions in context. After that, I will discuss in some detail more recent developments in the economic theory of choice, and modifications to this theory that are being forced by experimental evidence from cognitive psychology. -
A Monetary History of the United States, 1867-1960’
JOURNALOF Monetary ECONOMICS ELSEVIER Journal of Monetary Economics 34 (I 994) 5- 16 Review of Milton Friedman and Anna J. Schwartz’s ‘A monetary history of the United States, 1867-1960’ Robert E. Lucas, Jr. Department qf Economics, University of Chicago, Chicago, IL 60637, USA (Received October 1993; final version received December 1993) Key words: Monetary history; Monetary policy JEL classijcation: E5; B22 A contribution to monetary economics reviewed again after 30 years - quite an occasion! Keynes’s General Theory has certainly had reappraisals on many anniversaries, and perhaps Patinkin’s Money, Interest and Prices. I cannot think of any others. Milton Friedman and Anna Schwartz’s A Monetary History qf the United States has become a classic. People are even beginning to quote from it out of context in support of views entirely different from any advanced in the book, echoing the compliment - if that is what it is - so often paid to Keynes. Why do people still read and cite A Monetary History? One reason, certainly, is its beautiful time series on the money supply and its components, extended back to 1867, painstakingly documented and conveniently presented. Such a gift to the profession merits a long life, perhaps even immortality. But I think it is clear that A Monetary History is much more than a collection of useful time series. The book played an important - perhaps even decisive - role in the 1960s’ debates over stabilization policy between Keynesians and monetarists. It organ- ized nearly a century of U.S. macroeconomic evidence in a way that has had great influence on subsequent statistical and theoretical research. -
Sudhir Anand and Amartya Sen "Tell Me What You Eat,"
CONSUMPTION AND HUMAN DEVELOPMENT: CONCEPTS AND ISSUES Sudhir Anand and Amartya Sen 1. Introduction "Tell me what you eat," remarked Anthelme Brillat -Savarin nearly two hundred years ago, "and I will tell you what you aye." The idea that people can be known from their consumption behaviour has some plausibility. Eating enough and well nourishes us; over- eating renders us obese and unfit; education can make us wiser (or at least turn us into learned fools); reading poetry can make us sensitive; keeping up with the Joneses can overstretch our resources; and an obsession with fast cars may make us both "quicke and dead." There are few things more central than consumption to the lives that people variously lead. AIrrr~ ~nsumption is not the ultimate end of our lives. We seek consumption for a purpose, or for various purposes that may be simultaneously entertained. The role of consumption in human lives // cannot be really comprehended without some understanding of the ends that are pursued through consumption activities." tlur ends are enormously diverse, varying from nourishment to amusement, from living long to living well, from isolated self-fulfilment to interactive socialization. The priorities of human development, with which the Human Development Reports are concerned, relate to some basic human ends, 1 For a general introduction to the contemporary literature on consumption, see Angus Deaton and John Muellbauer, Economics and Consumer Behavior (Cambridge: Cambridge University Press, 1980). Consumption & Human Development Page 2 Background paper/ HDR1998 /UNDP Sudhir Anand & Amartya Sen and there is scope for scrutinizing how the prevailing consumption act i vi ties serve those ends. -
Economic Thinking in an Age of Shared Prosperity
BOOKREVIEW Economic Thinking in an Age of Shared Prosperity GRAND PURSUIT: THE STORY OF ECONOMIC GENIUS workingman’s living standards signaled the demise of the BY SYLVIA NASAR iron law and forced economists to recognize and explain the NEW YORK: SIMON & SCHUSTER, 2011, 558 PAGES phenomenon. Britain’s Alfred Marshall, popularizer of the microeconomic demand and supply curves still used today, REVIEWED BY THOMAS M. HUMPHREY was among the first to do so. He argued that competition among firms, together with their need to match their rivals’ distinctive feature of the modern capitalist cost cuts to survive, incessantly drives them to improve economy is its capacity to deliver sustainable, ever- productivity and to bid for now more productive and A rising living standards to all social classes, not just efficient workers. Such bidding raises real wages, allowing to a fortunate few. How does it do it, especially in the face labor to share with management and capital in the produc- of occasional panics, bubbles, booms, busts, inflations, tivity gains. deflations, wars, and other shocks that threaten to derail Marshall interpreted productivity gains as the accumula- shared rising prosperity? What are the mechanisms tion over time of relentless and continuous innumerable involved? Can they be improved by policy intervention? small improvements to final products and production Has the process any limits? processes. Joseph Schumpeter, who never saw an economy The history of economic thought is replete with that couldn’t be energized through unregulated credit- attempts to answer these questions. First came the pes- financed entrepreneurship, saw productivity gains as simists Thomas Malthus, David Ricardo, James Mill, and his emanating from radical, dramatic, transformative, discon- son John Stuart Mill who, on grounds that for millennia tinuous innovations that precipitate business cycles and wages had flatlined at near-starvation levels, denied that destroy old technologies, firms, and markets even as they universally shared progress was possible. -
After the Phillips Curve: Persistence of High Inflation and High Unemployment
Conference Series No. 19 BAILY BOSWORTH FAIR FRIEDMAN HELLIWELL KLEIN LUCAS-SARGENT MC NEES MODIGLIANI MOORE MORRIS POOLE SOLOW WACHTER-WACHTER % FEDERAL RESERVE BANK OF BOSTON AFTER THE PHILLIPS CURVE: PERSISTENCE OF HIGH INFLATION AND HIGH UNEMPLOYMENT Proceedings of a Conference Held at Edgartown, Massachusetts June 1978 Sponsored by THE FEDERAL RESERVE BANK OF BOSTON THE FEDERAL RESERVE BANK OF BOSTON CONFERENCE SERIES NO. 1 CONTROLLING MONETARY AGGREGATES JUNE, 1969 NO. 2 THE INTERNATIONAL ADJUSTMENT MECHANISM OCTOBER, 1969 NO. 3 FINANCING STATE and LOCAL GOVERNMENTS in the SEVENTIES JUNE, 1970 NO. 4 HOUSING and MONETARY POLICY OCTOBER, 1970 NO. 5 CONSUMER SPENDING and MONETARY POLICY: THE LINKAGES JUNE, 1971 NO. 6 CANADIAN-UNITED STATES FINANCIAL RELATIONSHIPS SEPTEMBER, 1971 NO. 7 FINANCING PUBLIC SCHOOLS JANUARY, 1972 NO. 8 POLICIES for a MORE COMPETITIVE FINANCIAL SYSTEM JUNE, 1972 NO. 9 CONTROLLING MONETARY AGGREGATES II: the IMPLEMENTATION SEPTEMBER, 1972 NO. 10 ISSUES .in FEDERAL DEBT MANAGEMENT JUNE 1973 NO. 11 CREDIT ALLOCATION TECHNIQUES and MONETARY POLICY SEPBEMBER 1973 NO. 12 INTERNATIONAL ASPECTS of STABILIZATION POLICIES JUNE 1974 NO. 13 THE ECONOMICS of a NATIONAL ELECTRONIC FUNDS TRANSFER SYSTEM OCTOBER 1974 NO. 14 NEW MORTGAGE DESIGNS for an INFLATIONARY ENVIRONMENT JANUARY 1975 NO. 15 NEW ENGLAND and the ENERGY CRISIS OCTOBER 1975 NO. 16 FUNDING PENSIONS: ISSUES and IMPLICATIONS for FINANCIAL MARKETS OCTOBER 1976 NO. 17 MINORITY BUSINESS DEVELOPMENT NOVEMBER, 1976 NO. 18 KEY ISSUES in INTERNATIONAL BANKING OCTOBER, 1977 CONTENTS Opening Remarks FRANK E. MORRIS 7 I. Documenting the Problem 9 Diagnosing the Problem of Inflation and Unemployment in the Western World GEOFFREY H. -
Download > the Keynesian Reaction to Lucas Duke 2017 Danilo Silva V1
The First Keynesian Reactions to Lucas’s Macroeconomics of Equilibrium Danilo Freitas Ramalho da Silva Federal University of ABC, Brazil January, 2017 E-mail: [email protected] 1. Introduction This paper describes the first Keynesian reactions to Lucas’s macroeconomic models in the early 1970’s. The referred Lucas’s models are equilibrium models in which the rational expectations hypothesis plays a central role in the prediction of expected values, in such a way that agents can make optimal intertemporal decisions given the set of information available to them. These models also imply a complete rejection of what Lucas considered to be the standard macroeconometric models at the time, in which some kind of adaptive expectations was typically used. I will show that the first Keynesian reaction to Lucas’s models was a criticism of the adoption of the rational expectations hypothesis, based on the argument that the hypothesis was not reasonable. This criticism reveals the fundamental methodological difference between Lucas and his first critics, since Lucas’s defense of the rational expectations hypothesis was based on its operationality, not on its reasonability. I will also show that Lucas’s complete rejection of what he then called the standard macroeconometric models was firstly considered by the Keynesians an extreme and unnecessary attitude, and that some of the Keynesians actually wanted to incorporate Lucas’s criticism into their own models - when appropriate - instead of just discarding them. Finally, I will show that new keynesians promptly incorporated the rational expectations hypothesis into their models in the mid-1970’s while the old keynesians did not, and this was the result of a move of new keynesians towards the operationality of assumptions and away from the reasonability of assumptions in their models. -
Zvi Griliches and the Economics of Technology Diffusion: Linking Innovation Adoption, Lagged Investments, and Productivity Growth
This work is distributed as a Discussion Paper by the STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH SIEPR Discussion Paper No. 15-005 Zvi Griliches and the Economics of Technology Diffusion: Linking innovation adoption, lagged investments, and productivity growth By Paul A. David Stanford Institute for Economic Policy Research Stanford University Stanford, CA 94305 (650) 725-1874 The Stanford Institute for Economic Policy Research at Stanford University supports research bearing on economic and public policy issues. The SIEPR Discussion Paper Series reports on research and policy analysis conducted by researchers affiliated with the Institute. Working papers in this series reflect the views of the authors and not necessarily those of the Stanford Institute for Economic Policy Research or Stanford University Zvi Griliches and the Economics of Technology Diffusion: Linking innovation adoption, lagged investments, and productivity growth By Paul A. David First version: August 2003 Second version: December 2005 Third version: March 31 2009 Fourth version: March 20, 2011 This version: April 4, 2015 Acknowledgements The present version is a revision of the Stanford Institute for Economic Policy Research (SIEPR) Discussion Paper No. 10‐029 (March), 2011. The first version of this work was presented to the Conference on R&D, Education and Productivity, held in Memory of Zvi Griliches (1930 –1999) on 25‐27th, August 2003 at CarrJ des Sciences, Ministère de la Recherche, Paris, France. Gabriel Goddard furnished characteristically swift and accurate assistance with the simulations, and the graphics based upon them that appear in Section 4. I am grateful to Wesley Cohen for his perceptive discussion of the conference version, particularly in regard to the supply‐side facet of Griliches’ 1957 article in Econometrica. -
An Interview with Franco Modigliani
THE UNIVERSITY OF KANSAS WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS AN INTERVIEW WITH FRANCO MODIGLIANI Interviewed by William A. Barnett University of Kansas Robert Solow MIT THE UNIVERSITY OF KANSAS WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS WORKING PAPER NUMBER 200407 Macroeconomic Dynamics, 4, 2000, 222–256. Printed in the United States of America. MD INTERVIEW AN INTERVIEW WITH FRANCO MODIGLIANI Interviewed by William A. Barnett Washington University in St. Louis and Robert Solow Massachusetts Institute of Technology November 5–6, 1999 Franco Modigliani’s contributions in economics and finance have transformed both fields. Although many other major contributions in those fields have come and gone, Modigliani’s contributions seem to grow in importance with time. His famous 1944 article on liquidity preference has not only remained required reading for generations of Keynesian economists but has become part of the vocabulary of all economists. The implications of the life-cycle hypothesis of consumption and saving provided the primary motivation for the incorporation of finite lifetime models into macroeconomics and had a seminal role in the growth in macroeconomics of the overlapping generations approach to modeling of Allais, Samuelson, and Diamond. Modigliani and Miller’s work on the cost of capital transformed corporate finance and deeply influenced subsequent research on investment, capital asset pricing, and recent research on derivatives. Modigliani received the Nobel Memorial Prize for Economics in 1985. In macroeconomic policy, Modigliani has remained influential on two continents. In the United States, he played a central role in the creation of a the Federal Re- serve System’s large-scale quarterly macroeconometric model, and he frequently participated in the semiannual meetings of academic consultants to the Board of Governors of the Federal Reserve System in Washington, D.C. -
Chapter 3 the Basic OLG Model: Diamond
Chapter 3 The basic OLG model: Diamond There exists two main analytical frameworks for analyzing the basic intertem- poral choice, consumption versus saving, and the dynamic implications of this choice: overlapping-generations (OLG) models and representative agent models. In the first type of models the focus is on (a) the interaction between different generations alive at the same time, and (b) the never-ending entrance of new generations and thereby new decision makers. In the second type of models the household sector is modelled as consisting of a finite number of infinitely-lived dynasties. One interpretation is that the parents take the utility of their descen- dants into account by leaving bequests and so on forward through a chain of intergenerational links. This approach, which is also called the Ramsey approach (after the British mathematician and economist Frank Ramsey, 1903-1930), will be described in Chapter 8 (discrete time) and Chapter 10 (continuous time). In the present chapter we introduce the OLG approach which has shown its usefulness for analysis of many issues such as: public debt, taxation of capital income, financing of social security (pensions), design of educational systems, non-neutrality of money, and the possibility of speculative bubbles. We will focus on what is known as Diamond’sOLG model1 after the American economist and Nobel Prize laureate Peter A. Diamond (1940-). Among the strengths of the model are: The life-cycle aspect of human behavior is taken into account. Although the • economy is infinitely-lived, the individual agents are not. During lifetime one’s educational level, working capacity, income, and needs change and this is reflected in the individual labor supply and saving behavior. -
CURRICULUM VITAE August, 2015
CURRICULUM VITAE August, 2015 Robert James Shiller Current Position Sterling Professor of Economics Yale University Cowles Foundation for Research in Economics P.O. Box 208281 New Haven, Connecticut 06520-8281 Delivery Address Cowles Foundation for Research in Economics 30 Hillhouse Avenue, Room 11a New Haven, CT 06520 Home Address 201 Everit Street New Haven, CT 06511 Telephone 203-432-3708 Office 203-432-6167 Fax 203-787-2182 Home [email protected] E-mail http://www.econ.yale.edu/~shiller Home Page Date of Birth March 29, 1946, Detroit, Michigan Marital Status Married, two grown children Education 1967 B.A. University of Michigan 1968 S.M. Massachusetts Institute of Technology 1972 Ph.D. Massachusetts Institute of Technology Employment Sterling Professor of Economics, Yale University, 2013- Arthur M. Okun Professor of Economics, Yale University 2008-13 Stanley B. Resor Professor of Economics Yale University 1989-2008 Professor of Economics, Yale University, 1982-, with joint appointment with Yale School of Management 2006-, Professor Adjunct of Law in semesters starting 2006 Visiting Professor, Department of Economics, Massachusetts Institute of Technology, 1981-82. Professor of Economics, University of Pennsylvania, and Professor of Finance, The Wharton School, 1981-82. Visitor, National Bureau of Economic Research, Cambridge, Massachusetts, and Visiting Scholar, Department of Economics, Harvard University, 1980-81. Associate Professor, Department of Economics, University of Pennsylvania, 1974-81. 1 Research Fellow, National Bureau of Economic Research, Research Center for Economics and Management Science, Cambridge; and Visiting Scholar, Department of Economics, Massachusetts Institute of Technology, 1974-75. Assistant Professor, Department of Economics, University of Minnesota, 1972-74. -
Advanced Econometrics Methods II Outline of the Course
Advanced Econometrics Methods II Outline of the Course Joan Llull Advanced Econometric Methods II Master in Economics and Finance Barcelona GSE Chapter 1: Panel Data I. Introduction II. Static Models A. The Fixed Effects Model. Within Groups Estimation B. The Random Effects Model. Error Components C. Testing for Correlated Individual Effects III. Dynamic Models A. Autoregressive Models with Individual Effects B. Difference GMM Estimation C. System GMM Estimation D. Specification Tests References: Sargan(1958), Balestra and Nerlove(1966), Hausman(1978), Cham- berlain(1984), Amemiya(1985), Anderson and Hsiao(1981, 1982), Hansen(1982), Arellano and Bond(1991), Arellano and Bover(1995), Arellano and Honor´e (2001), Wooldridge(2002), Arellano(2003), Cameron and Trivedi(2005), Wind- meijer(2005) Chapter 2: Discrete Choice I. Binary Outcome Models A. Introduction B. The Linear Probability Model C. The General Binary Outcome Model Maximum Likelihood Estimation Asymptotic properties Marginal effects D. The Logit Model 1 E. The Probit Model F. Latent Variable Representation Index function model (Additive) Random utility model II. Multinomial Models A. Multinomial Outcomes B. The General Multinomial Model Maximum Likelihood estimation Asymptotic properties Marginal effects C. The Logit Model The Multinomial Logit (MNL) The Conditional Logit (CL) D. Latent Variable Representation E. Relaxing the Independence of Irrelevant Alternatives Assumption The Nested Logit (NL) Random Parameters Logit (RPL) Multinomial Probit (MNP) F. Ordered Outcomes III. Endogenous Variables A. Probit with Continuous Endogenous Regressor B. Probit with Binary Endogenous Regressor C. Moment Estimation IV. Binary Models for Panel Datas References: McFadden(1973, 1974, 1984), Manski and McFadden(1981), Amemiya (1985), Wooldridge(2002), Cameron and Trivedi(2005), Arellano and Bonhomme (2011) Chapter 3: Dynamic Discrete Choice Models I: Full Solution Approaches I. -
Front Matter, R&D, Patents, and Productivity
This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: R & D, Patents, and Productivity Volume Author/Editor: Zvi Griliches, ed. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-30884-7 Volume URL: http://www.nber.org/books/gril84-1 Publication Date: 1984 Chapter Title: Front matter, R&D, Patents, and Productivity Chapter Author: Zvi Griliches Chapter URL: http://www.nber.org/chapters/c10041 Chapter pages in book: (p. -13 - 0) R&D, Patents, and Productivity A National Bureau of Economic Research Conference Report R&D, Patents, and Productivity Edited by Zvi Griliches The University of Chicago Press Chicago and London The University ofChicago Press, Chicago 60637 The University of Chicago Press, Ltd. , London © 1984 by the National Bureau ofEconomic Research All rights reserved. Published 1984 Paperback edition 1987 Printed in the United States ofAmerica 9695 9493 9291 9089 88 87 6543 2 LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA Main entry under title: R&D, patents, and productivity. Papers presented at a conference held in Lenox, Mass., in the fall of 1981, and organized by the National Bureau of Economic Research. Includes indexes. 1. Research, Industrial-United States-Congresses. 2. Patents-United States-Congresses. 3. Industrial productivity-United States-Congresses. I. Griliches, Zvi, 1930- II. National Bureau of Economic Research. III. Title: Rand D, patents, and productivity. HD30.42.U5R2 1984 338' .06 83-18121 ISBN 0-226-30883-9 (cloth); 0-226-30844-7 (paper) National Bureau of Economic Research Officers Walter W. Heller, chairman Franklin A.