Chapter

Benchmark Macroeconomic Models and Policy Advice

Kartik B. Athreya

in Big Ideas in Macroeconomics

Published by The MIT Press

Published in print December 2013 | ISBN: 9780262019736
Published online May 2014 | e-ISBN: 9780262314404 | DOI: http://dx.doi.org/10.7551/mitpress/9780262019736.003.0006
Benchmark Macroeconomic Models and Policy Advice

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Versions of the ADM model are the starting point for much macroeconomic analysis. But how can such models possibly play any role at all in organizing macroeconomists’ thinking? After all, not only is the baseline ADM model abstract, it also seems incapable of describing a world that lasts more than one period, especially when that world features uncertainty that only slowly resolves itself. This chapter explores how an alternative trading arrangement, known as the Radner model, helps us adapt the ADM model to interpret real world data. We then learn about the central class of long-run macroeconomic models, known as “growth models” in which the Radner model of trading plays a central role. Lastly, we’ll see how engaged macroeconomics is with issues of inequality and heterogeneity.

Keywords: Time and Uncertainty; Radner model; Malthusian model; Solow Model; Ramsey-Cass-Koopmans model; SIM model; OG model; Search model

Chapter.  44990 words. 

Subjects: Macroeconomics and Monetary Economics

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