New classical/real business cycle macroeconomics. The anatomy of a revolution

Michel De Vroey

No 2009026, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: The aim of the present paper is to assess the new classical/real business cycle revolution, which dethroned Keynesian macroeconomics. In its first part, I critically discuss the microfoundations requirement that constitutes a cornerstone of the new approach and suggest an alternative, softer, formulation of it. The conclusion of this discussion is that the new classical/real business cycle revolution marked a transition from a soft to a demanding understanding of the microfoundations requirement. In the second part of the paper, I present additional salient traits of the new classical and the real business cycle stages of the revolution. While each of these stages brought a specific contribution to the revolution, I emphasize the decisive role played by Kydland and Prescott in re-orienting the type of work in which macroeconomists were engaged. Finally, in part three, I ponder upon the causes of this revolution. After presenting and assessing Prescott’s and Lucas’s accounts of the factors which gave rise to the new approach, I venture into muddier waters by raising the question of whether a political agenda underpinned the NC/RBC revolution.

Pages: 27
Date: 2009-08-01
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (3)

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