Standard micro-founded macroeconomics starts with optimization exercises to derive the precise behavior of the representative agent and regards the macroeconomy as a homothetic enlargement of a micro agent. This paper takes a different approach and presents a new micro-foundation for Keynesian economics. The key concept is stochastic macro-equilibrium, which is a natural extension of the labor ...

This paper extends the standard New Keynesian model by incorporating labor adjustment costs and overtime work. I show that labor frictions help reconcile the frequent price changes found in the microdata with the degree of sluggishness in inflation adjustment to output changes at the macro level. The introduction of labor frictions affects the dynamic behavior of economic variables (particularl...

The Harrod-Domar growth model is extended in a way that introduces the possibility of persistent excess capacity as a potential source of slow growth. This extended model has five growth rates, which must be equal for there to be a full-employment, full-capacity dynamic equilibrium, instead of the three growth rates in the standard Harrod-Domar model. These growth rates will be called the justi...

We study identiÞcation in a class of three-equation monetary models. We argue that these models are typically not identiÞed. For any given exactly identiÞed model, we provide an algorithm that generates a class of equivalent models that have the same reduced form. We use our algorithm to provide four examples of the consequences of lack of identiÞcation. In our Þrst two examples we show that it...

Marshall’s asset equilibrium model provides a way of explaining the identity of entrepreneurs. Keynes adopted this model but transformed it when he emphasized the short-period and volatile character of long-term expectations. This entails a view of entrepreneur identity in which radical uncertainty plays a central role. This in turn deepens the post Keynesian view of uncertainty as ontological ...

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T he IS-LM model has been a central tool of macroeconomic teaching and practice for over half a century. Legions of earlier writers have offered criticisms of the model that have become familiar with the passage of time: the model lacks microeconomic foundations, assumes price stickiness, has no role for expectations, and simplifies the economy’s complexities to a handful of crude aggregate rel...