Riccardo Faini CEIS Seminars
Michel De Vroey (Universite Catholique de Louvain)

The Lucas/Kydland & Prescott Transformation of Macroeconomics. An Assessment

Riccardo Faini CEIS Seminars
When

Friday, April 12, 2019 h. 12:00-13:30

Where

Room B - 1st Floor – Building B
Facolta' di Economia
Universita' degli Studi di Roma 'Tor Vergata'
Via Columbia 2, Roma

Description

Michel De Vroey (Universite Catholique de Louvain)

Is the present-day unpopularity of macroeconomics deserved? Are there good reasons for defending the turn taken by macroeconomics in the last decades or was Krugman right when writing that present-day macroeconomics has it all wrong? These could be two less academic titles for my seminar. Drawing from my book, A History of Macroeconomics from Keynes to Lucas and Beyond (CUP 2016) I will ponder on the rise of the DSGE (dynamic stochastic genera equilibrium) program which marked the demise of Keynesian macroeconomics. I will make two claims. The first is that Lucas’s role in this transformation was mainly methodological and consisted in setting up narrower standards for a better research practice in macroeconomics. The second is about Kydland and Prescott’s role. By inaugurating RBC modeling, they transformed Lucas’s insights into an operational research program which proved able to rally the majority of the macroeconomics profession. I will show that the answer to the two above questions hinges on how we weight two contradictory observations. On the one hand, the RBC baseline model is a Robinson Crusoe Ramsey model, wherefrom any trade is absent. In an a priori way, it looks preposterous to use such a model for doing applied work. On the other hand, the RBC program has testified to impressive cumulative development.

Additional information on the event

Responsabile Scientifico
Nicola Amendola

Organizzazione
Barbara Piazzi
06-72595601
piazzi@ceis.uniroma2.it