Documents Farmer, Roger E.A. 4 results

"This paper has three parts. Part 1 constructs a classical economic model of inflation, augmented by a complete set of financial markets; I call this the core monetary model. Part 2 develops a series of calibrated examples to illustrate how the core monetary model explains the history of inflation after the Second World War, and Part 3 provides evidence to show that the unconventional monetary policy, followed in the wake of the 2008 financial crisis, was effective in stabilizing inflation expectations. The core monetary model provides a unified framework to explain how an interest rule can be used to control inflation in normal times, and to explain the purpose of unconventional monetary policy when policy attains the zero lower bound. I argue that management of the variation in the composition of the Fed's balance sheet, is an important tool in a central bank's arsenal that can be used to help prevent deflation in the wake of a financial crisis."

"This paper explains the connection between ideas developed in my recent books and papers and those of economists who self-identify as post-Keynesians. My own work is both neoclassical and ‘old Keynesian.' Much of my published work assumes that people have rational expectations and that ‘animal spirits' should be modeled as a new fundamental. I adopt a general equilibrium framework to model the macroeconomy. But although I write from a neoclassical tradition the themes I explore in my published writing have much in common with heterodox economics. This paper explains the common elements between these seemingly disparate traditions. I make the case for unity between post-Keynesian and general equilibrium theory under the banner of post-Keynesian dynamic stochastic general equilibrium theory."

"For the past 30 years of the history of macroeconomic thought, the Indeterminacy School of Macroeconomics has used general equilibrium models with indeterminate equilibria to understand the independent role of beliefs in shaping macroeconomic outcomes. In this paper I review the most recent advances in the indeterminacy agenda, Keynesian Search Theory, and I advance that agenda by introducing self-fulfilling beliefs to a Keynesian Search Model in two different ways. One variant of the model is driven by an exogenous process for investment expenditure. If investment is exogenous, the only way to restore full employment is by replacing private investment with public investment. The second variant of the model is driven by consumer confidence. If consumer confidence is exogenous, treasury or central bank intervention in the asset markets is a more effective means of restoring full employment than fiscal policy. In either scenario, increased government consumption will not be effective at maintaining full employment in the face of permanently depressed beliefs about the value of private assets."