Uncertainty, Policy Ineffectiveness, and Long Stagnation of the Macroeconomy

Masanao Aoki and Hiroshi Yoshikawa
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Hiroshi Yoshikawa: Faculty of Economics, University of Tokyo

No CIRJE-F-197, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: The standard analysis in macroeconomics depends on the assumption of the representative agent. However, when the degree of uncertainty becomes significant, we cannot ignore a simple fact that the macroeconomy consists of a large number of heterogeneous agents. In this paper, we demonstrate the importance of the combinatory aspect. Specifically, the effectiveness of policy necessarily weakens as the degree of uncertainty rises. One might call this probrem "uncertainty trap". This may contribute to long stagnation of the macroeconomy.

Pages: 22 pages
Date: 2003-08
New Economics Papers: this item is included in nep-lam and nep-mac
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Uncertainty, policy ineffectiveness, and long stagnation of the macroeconomy (2006)
Working Paper: Uncertainty, Policy Ineffectiveness, and Long Stagnation of the Macroeconomy (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2003cf197

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