The new classical approach to macroeconomics, which assumes that people gather and use economic information efficiently, has been the most important theoretical advance since the Keynesian revolution of the 1930s. This book surveys the major contributions of the “second generation” of proponents of the new classical approach, emphasizing real business cycle theories and applying them to a variety of phenomena.
The chapters include expositions of growth theory, real models of business fluctuations, the informational role of prices, consumption, fiscal policy, rules versus discretion in monetary policy, time consistency and policy, and monetary models. Although the chapters are aimed at advanced undergraduate- and graduate-level students, they will also be of interest to researchers who are looking for a compact and original exposition of the new classical macroeconomics.
This book contains essays written by distinguished authors, each surveying some recent developments in a particular area of macroeconomics, and all written or revised expressly for this volume. The book emphasizes research that assumes market clearing and rational expectations—what Barro in his introduction calls new classical macroeconomics.
Barro’s articles are a nice blend of theory and empiricism. They add rigor and offer many insights.
The book succeeds admirably. Readers might have different favorites among the essays in the volume, but all of them are substantive and meet Barro’s criteria of readability and comprehensiveness. A feature of all the essays is that they contain at least prototype models in the areas covered. Graduate students, who will be the most widespread audience for the book, will see the models solved and results derived, not merely surveyed… Bennett McCallum’s survey of real business cycle models…is likely to find its way onto many graduate course reading lists… Sanford Grossman’s essay explores required alterations in the Walrasian equilibrium paradigm when information is dispersed among traders… Robert Hall…describes the development of the Euler equation characterization of optimal consumption over time… [Barro offers] a wide-ranging survey of the neoclassical approach to fiscal policy… Kenneth Rogoff’s essay [covers] reputational considerations in policymaking… The essay by Chari, Kehoe and Prescott also focuses on strategic considerations in policymaking in a repeated game framework… [Neil] Wallace analyzes the effects of open market operations in a variety of models.
- 348 pages
- 6-1/8 x 9-1/4 inches
- Harvard University Press
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