Lectures on Behavioral Macroeconomics
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A01=Paul De Grauwe
Aggregate demand
Aggregate supply
Author_Paul De Grauwe
Autocorrelation
Business cycle
Capitalism
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Category=KCB
Category=KCK
Central bank
Consumer confidence
Correlation coefficient
Credibility
Economic equilibrium
Economic growth
Economics
Economist
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eq_business-finance-law
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eq_isMigrated=2
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Error term
Extrapolation
Fat-tailed distribution
Financial crisis
Fiscal policy
Forecast error
Forecasting
Frequency distribution
General equilibrium theory
Granger causality
Great Moderation
Impulse response
Inflation
Inflation targeting
Interest rate
Investment
Knightian uncertainty
Liquidity trap
Lucas critique
Macroeconomic model
Macroeconomics
Market liquidity
Market sentiment
Monetary authority
Monetary policy
New Keynesian economics
Normal distribution
Optimism
Output gap
Pessimism
Prediction
Price Change
Price level
Pricing
Probability
Rational agent
Rational choice theory
Rational expectations
Rationality
Real business-cycle theory
Recession
Result
Risk aversion
Risk premium
Sentiment Indicator
Share price
Standard deviation
Stock market
Stylized fact
Supply (economics)
Supply and demand
Supply shock
Taylor rule
Trade-off
Uncertainty
Utility
Valuation (finance)
Product details
- ISBN 9780691147390
- Weight: 369g
- Dimensions: 152 x 235mm
- Publication Date: 14 Oct 2012
- Publisher: Princeton University Press
- Publication City/Country: US
- Product Form: Hardback
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In mainstream economics, and particularly in New Keynesian macroeconomics, the booms and busts that characterize capitalism arise because of large external shocks. The combination of these shocks and the slow adjustments of wages and prices by rational agents leads to cyclical movements. In this book, Paul De Grauwe argues for a different macroeconomics model--one that works with an internal explanation of the business cycle and factors in agents' limited cognitive abilities. By creating a behavioral model that is not dependent on the prevailing concept of rationality, De Grauwe is better able to explain the fluctuations of economic activity that are an endemic feature of market economies. This new approach illustrates a richer macroeconomic dynamic that provides for a better understanding of fluctuations in output and inflation. De Grauwe shows that the behavioral model is driven by self-fulfilling waves of optimism and pessimism, or animal spirits. Booms and busts in economic activity are therefore natural outcomes of a behavioral model.
The author uses this to analyze central issues in monetary policies, such as output stabilization, before extending his investigation into asset markets and more sophisticated forecasting rules. He also examines how well the theoretical predictions of the behavioral model perform when confronted with empirical data. * Develops a behavioral macroeconomic model that assumes agents have limited cognitive abilities * Shows how booms and busts are characteristic of market economies * Explores the larger role of the central bank in the behavioral model * Examines the destabilizing aspects of asset markets
Paul De Grauwe is professor of international economics at the London School of Economics and Political Science. He is the author or coauthor of several books, including The Exchange Rate in a Behavioral Finance Framework (Princeton) and Economics of Monetary Union.
