Expectations, Employment and Prices: A Suggested Interpretation of the New 'Farmerian' Economics

Marco Guerrazzi

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: This paper aims at providing a critical assessment of the new 'Farmerian' economics, i.e. the recent Farmer's attempt to provide a new micro-foundation of the General Theory grounded on modern search and business cycle theories. Specifically, I develop a theoretical model that summarizes the main arguments of the suggested approach by showing that a special importance has to be attached to the search mechanism, the choice of units and 'animal spirits' modelling. Thereafter, referring to self-made real-business-cycle experiments, I discuss the main empirical implications of the resulting framework. Finally, I consider its policy implications by stressing the problematic nature of demand management interventions and the advisability of extending the role of the central bank in preventing financial bubbles and crashes.

Keywords: New 'Farmerian' Economics; Search Theory; Demand Constrained Equilibrium; Bubbles and Crashes. (search for similar items in EconPapers)
JEL-codes: E12 E24 (search for similar items in EconPapers)
Date: 2011-01-05
New Economics Papers: this item is included in nep-cba, nep-hpe and nep-mac
Note: ISSN 2039-1854
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Citations: View citations in EconPapers (2)

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https://www.ec.unipi.it/documents/Ricerca/papers/2011-116.pdf (application/pdf)

Related works:
Journal Article: Expectations, Employment and Prices: A Suggested Interpretation of the New «Farmerian» Economics (2012)
Working Paper: Expectations, employment and prices: a suggested interpretation of the new 'farmerian' economics (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2011/116

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