Foundations for a Disequilibrium Theory of the Business Cycle
Qualitative Analysis and Quantitative Assessment

This book presents a dynamic model of the macroeconomy that will appeal both to theorists and economic policy-makers.

Carl Chiarella (Author), Peter Flaschel (Author), Reiner Franke (Author)

9780521850254, Cambridge University Press

Hardback, published 27 October 2005

550 pages
22.9 x 15.2 x 3 cm, 1 kg

Review of the hardback: ' … icy-relevant approach to macroeconomic analysis decisively forward. Their careful synthesis of realistic dynamic elements and their careful analysis of the sensitivity and stability characteristics of their model in a policy context is much to be admired. In this book the Bielefeld School achieves a genuine culmination of great depth and breadth.' J. Barkley Rosser, Jr, James Madison University, from the Foreword

Building on The Dynamics of Keynesian Monetary Growth by Chiarella and Flaschel (2000), this book is a key contribution to business cycle theory, setting out a disequilibrium approach with gradual adjustments of the key macroeconomic variables. Its analytic study of a deterministic model of economic activity, inflation and income distribution integrates elements in the tradition of Keynes, Metzler and Goodwin (KMG). After a qualitative analysis of the basic feedback mechanisms, the authors calibrate the KMG model to the stylized facts of the business cycle in the U.S. economy, and then undertake a detailed numerical investigation of the local and global dynamics generated by the model. Finally, topical issues in monetary policy are studied in small macromodels as well as for the KMG model by incorporating an estimated Taylor-type interest rate reaction function. The stability features of this enhanced model are also compared to those of the original KMG model.

Figures
Tables
Notation
Foreword J. Barkley Rosser, Jr
Preface
1. Competing approaches to Keynesian macrodynamics
Part I. Textbook Approaches: 2. AS-AD growth theory: a complete analysis of the textbook model
3. Disequilibrium growth: the point of departure
Part II. Analytical Framework. Theory and Evidence: 4. The Keynes-Metzler-Goodwin model
5. Calibration of three wage-price modules
6. Calibration of the full KMG model
7. Subsystems and sensitivity analysis of the KMG model
Part III. Monetary Policy: 8. The Taylor Rule in small macro models
9. Incorporating the Taylor Rule into KMG
References.

Subject Areas: Development economics & emerging economies [KCM], International economics [KCL], Macroeconomics [KCB]