The economic performances of the Eurozone look weaker than those of the United States over the period 1999-2006, in spite of the fact that the former applies more thoroughly the 'new macroeconomics' governance rules concerning public deficits and inflation control. The literature emphasizes Alan Greenspan's pragmatism when discussing the relative success of the Fed, but the reasons why pragmati...

We study a model of firm price setting with customer markets and empirically evaluate its predictions. Our framework captures the dynamics of customers in response to a change in the price set by firms, describes the behavior of optimal prices in the presence of customer retention concerns, and delivers a general equilibrium model of price and customer dynamics. We exploit micro data on purchas...

An integrated monetary growth model of Keynes–Metzler–Goodwin type with a portfolio approach to its three asset markets (money, bonds, equities) is introduced to study the interaction between the real and the financial part of market economies. Beneath expectations and governmental behavior, profits and their implied dividend payments influence the behavior of asset markets, which determine int...

Price-setting models with monopolistic competition and costs of changing prices exhibit coordination failure: in response to a monetary policy shock, individual agents lack incentives to change prices even when it would be Pareto-improving if all agents did so. The potential welfare gains are in part evaluated relative to a benchmark equilibrium of perfect, costless coordination; in practice, s...

This paper studies conditions under which demand-side shocks can generate realistic business cycles in RBC models. Although highly persistent demand shocks are necessary for generating procyclical investment, variable capacity utilization and habit formation can reduce the required degree of persistence. Keywords: Demand Shocks; Hall’s Residual; Real Business Cycles; Crowding Out; Investment Dy...

We investigate an open monetary growth model with sluggish prices and quantities. The model combines the dynamics of Rose's employment cycle and Metzler's inventory cycle with internal nominal dynamics of Tobin and external nominal dynamics of Dornbusch type, implying eight laws of motion, four for the real sector and four for the nominal part. These intrinsically nonlinear 8D-dynamics are asym...

Recent developments in econometrics and economic theory attest the growing evidence of strong uncertainty. The paper argues that these developments both question seriously the methodological foundations of the mainstream macroeconomics and support Keynes’s powerful concepts and theory. It emphasizes how replacing ‘risk’ with strong uncertainty suffices to transform the standard four-macro-marke...

The paper relates to the burgeoning literature that combines an interest rate reaction function of the central bank with an IS equation and a Phillips curve relationship. It takes up the deterministic prototype model advocated by J.B.Taylor and D.Romer and, under the assumption of open market operations, makes the implied dynamics of bonds and high-powered money explicit. As a minor extension, ...