This morning, I finished an excellent EconTalk episode in which Russ Roberts interviews Ricardo Reis on the topic of what we do and don't know about macroeconomics. This interview represents one data point in a recent flurry of papers and talks relating to the state of marcoeconomics. I thought I'd put together a list of these sources here.
Recent papers (in order of my preference):
Recent papers (in order of my preference):
- New Keynesian Models: Not Yet Useful for Policy Analysis (by Chari, Kehoe, and McGrattan)
- Convergence in Macroeconomics: Elements of a New Synthesis (by Woodford)
- The State of Macro (by Blanchard)
- Russ Roberts and Ricardo Reis (New Keynesians vs. New Monterists, why we know a lot about monetary policy, but not fiscal policy)
- Russ Roberts and Don Boudreaux (the imporatance of microfoundations in macroeconomics, where Austrian Business Cycle theory has gone)
- Tom Keene and Robert Lucas and Ed Prescott (mp3) (the development of macro theory, the importance of microfoundations)
The common themes throughout these articles and interviews are that:
- Microfoundations are very important
- Identifying the structural parameters are key for policy analysis
- Both Neo-classicals and New Keynesians agree on what an ideal model should have (it's a structural model that fits both micro and macro data)
- Neo-classicals and New Keynsians differ on the degree to which one can comprimise along certain dimensions (matching macro data, using a structural model with policy invariant parameters, etc.)
- Economists have a much better understanding of monetary policy than they do of fiscal policy. This is true in both the theory and empirics.
