Exact(23)
It has forced us to incorporate into our macro models those animal spirits that dominate finance".
Second, macro models need to account for the ways that debt and excess investment suppress economic activity following a boom.
Our macro models at the Levy Economics Institute are showing that the US economy is about to face a repeat of pre-crisis-style, debt-led growth, based on increased borrowing.
Today's mainstream macro models contain a small number of "representative agents", such as a household, a non-financial business and the government, but no banks.
For decades, the evidence appeared to support this thesis, although astute observers of events in the Nordics and Japan would have been more cautious.So the original postwar macro models left out the financial system.
Mark Thoma sends us to Simon Wren-Lewis on microfounded macro models (especially the DSGE models that have dominated the literature even on the Keynesian side) versus "ad hoc" models like IS-LM.
Similar(37)
So, as I've made very clear on this blog, my view is that a pretty standard IS-LMish macro model has done very well in recent years.
I use a multifactor macro model.
This paper describes a macro model for a shallow foundation.
It is a useful attempt to summarize varied research in a comprehensive thematic macro model.
We constructed a simple macro model on the net worth ratio of the firm.
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