The Indeterminacy Agenda in Macroeconomics

Roger Farmer

No 507, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: This article surveys a subset of literature in macroeconomics which embraces the existence of multiple equilibria. This indeterminacy agenda in macroeconomics uses multiple-equilibrium models to integrate economics with psychology. Economists have long argued that business cycles are driven by shocks to the productivity of labour and capital. According to the indeterminacy agenda, the selffulfilling beliefs of financial market participants are additional fundamental factors that drive periods of prosperity and depression. The indeterminacy agenda provides a microeconomic foundation to Keynes’ General Theory that does not rely on the assumption that prices and wages are costly to change.

Keywords: macroeconomics; multiple equilibria; psychology; business cycles; labour and capital (search for similar items in EconPapers)
JEL-codes: D5 E40 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-dge, nep-hpe, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:507

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