Article

Economists, incentives, judgment, and the European CVAR approach to macroeconometrics

Economics (Impact Factor: 0.39). 01/2009; 3(9):1-21. DOI: 10.5018/economics-ejournal.ja.2009-9
Source: RePEc

ABSTRACT This paper argues that the DSGE approach to macroeconometrics is the dominant approach because it meets the institutional needs of the replicator dynamics of the profession, not because it is necessarily the best way to do macroeconometrics. It further argues that this 'DSGE theory-first' approach is inconsistent with the historical approach that economists have advocated in the past and that the alternative European CVAR approach is much more consistent with economist's historically used methodology, correctly understood. However, because the European CVAR approach requires explicit researcher judgment, it does not do well in the replicator dynamics of the profession. The paper concludes with the suggestion that there should be an increase in dialog between the two approaches. --

0 Followers
 · 
77 Views
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper argues that the reason that the DSGE model, which has proved so successful in convincing academic economists of its value, has made relatively few inroads into the undergraduate teaching sphere is that it fails to allow for the development of higher order educational objectives in students. The qualities which make it attractive to academics, such as the purity of its assumptions and its sound microeconomic basis, have little resonance with undergraduate students. Instead, the qualities of the neo-Keynesian model, such as its ability to incorporate 'real-world' institutional features and the ease with which it can be used to develop higher order skills and applications, prove much more attractive.
    SSRN Electronic Journal 06/2009; 10(2):7-15. DOI:10.2139/ssrn.1433568
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper considers how economists failed society by not preparing society to expect and plan for a possible financial crisis. It argues that the story told by Paul Krugman in his recent NYT Magazine article was too black and white in that it made it look as if Classical economists who were blinded by the beauty of mathematics, are to blame and that Keynesian economics is the path of the future. This paper takes issue with both those claims. It reviews the evolution of economic thinking from Classical to modern times, and shows the Keynesian/Classical terminology misses many of the nuances of policy discussions. It suggests that the solution for the macroeconomics profession isn’t the solution that Krugman suggests it is—to re-embrace Keynes. The solution is to re-embrace the broader Classical economic tradition, and to recognize that Keynes was an important part of that Classical tradition.
    Critical Review 03/2011; 23(1-2-1-2):1-27. DOI:10.1080/08913811.2011.574468 · 0.63 Impact Factor
  • Source

Full-text (4 Sources)

Download
59 Downloads
Available from
May 31, 2014