Beyond DSGE: A macrodynamic model with intertemporal coordination failure

Ronny Mazzocchi

Department of Economic Policy, Finance and Development (DEPFID) University of Siena from Department of Economic Policy, Finance and Development (DEPFID), University of Siena

Abstract: The current consensus in macroeconomics, or New Neoclassical Synthesis (NNS), is based on dynamically stochastic general equilibrium (DSGE) modelling with a RBC core to which nominal rigidities are added by way of imperfect competition. The strategy is to minimize the frictions that are required to reproduce Keynesian results (in terms of persistent real effects of monetary policy) and Wicksellian results (in terms of interaction of interest and prices) in a rigorous framework with intertemporal optimization of consumption, forward-looking behavior and continously clearing markets. In reality the main contention of Keynes and Wicksell was saving-investment imbalances (i.e. capital market failures and intertemporal disequilibrium in modern parlance) that are notably absent from the NNS. The paper presents a dynamic model with endogenous capital stock whereby it is possible to assess, and hopefully clarify, some basic issues concerning the macroeconomics of saving-investment imbalances and to explore the dynamic properties of the system under different monetary policy rules.

Keywords: macroeconomics; monetary policy; New Neoclassical Synthesis; saving-investment imbalances; intertemporal coordination failure. (search for similar items in EconPapers)
JEL-codes: E21 E22 E31 E32 E52 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:usi:depfid:0210

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