This paper aims at providing a critical assessment of the New ‘Farmerian’ economics, i.e., Farmer’s attempt to provide a fresh micro-foundation of the General Theory grounded on modern search and business cycle theories with the goal of offering a rationale for finance-induced recessions. Specifically, I develop a model that summarizes the main arguments of the suggested approach by showing that a special importance has to be paid to the search mechanism, the choice of units and ‘animal spirits’ modelling. Thereafter, referring to recent computational experiments, I discuss some possible empirical implications of the resulting framework. Finally, I put forward the lines for new theoretical and empirical developments by sketching the policy implications towards which the new Farmerian economics might lead.
Expectation, Employment and Prices: A Suggested Interpretation of the New 'Farmerian' Economics
GUERRAZZI, MARCO
2012-01-01
Abstract
This paper aims at providing a critical assessment of the New ‘Farmerian’ economics, i.e., Farmer’s attempt to provide a fresh micro-foundation of the General Theory grounded on modern search and business cycle theories with the goal of offering a rationale for finance-induced recessions. Specifically, I develop a model that summarizes the main arguments of the suggested approach by showing that a special importance has to be paid to the search mechanism, the choice of units and ‘animal spirits’ modelling. Thereafter, referring to recent computational experiments, I discuss some possible empirical implications of the resulting framework. Finally, I put forward the lines for new theoretical and empirical developments by sketching the policy implications towards which the new Farmerian economics might lead.
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