La Economía de la Narrativa: Impacto en los Ciclos Macroeconómicos y su Incorporación en Modelos IS-LM y DSGE

The Economy of Narrative: Impact on Macroeconomic Cycles and Its Incorporation into IS-LM and DSGE Models

Carlos Alfredo Uquillas

MPRA Paper from University Library of Munich, Germany

Abstract: This article examines how economic narratives, such as those emerging from business communication, the media, and economic authorities, affect economic behavior and agents' decisions. Based on Keynes' theory of "animal spirits" and Robert Shiller's work on the influence of narratives, a model is proposed in which narratives can directly influence macroeconomic variables such as consumption, investment, and income. Through an applied approach, it suggests how to integrate narrative variables into IS-LM and DSGE models to better understand their effects on the economic cycle. The article also discusses how "confidence" and other narrative expectations affect economic activity and how authorities could incorporate this concept into their analysis and policy formulation.

Keywords: Narrative Economics; Economic Confidence; Economic Cycle; IS-LM Model; DSGE Model; Expectations; Narrative Contagion; Animal Spirits; Narrative Hysteresis; Rational Expectations. (search for similar items in EconPapers)
JEL-codes: D83 E32 E44 E50 (search for similar items in EconPapers)
Date: 2025-02-12
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