I provide an outline of how a modern theory of search, modelled by a two-sided matching function, can be used to form a microfoundation to Keynesian economics. This search theory of the labor market has one less equation than unknown and, when combined with the idea that investment is driven exogenously by ‘animal spirits,’ the marriage leads to a microfounded theory of business cycles. This al...

Keynesian economics (pronounced /ˈkeɪnziən/ KAYN-zee-ən, also called Keynesianism and Keynesian theory) is a macroeconomic theory based on the ideas of 20th century British economist John Maynard Keynes. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including mon...

In an attempt to explain and forecast the behavior of economic variables and of the economy as a whole, each school of economics creates its own system of paradigms, premises and models. The New Keynesian school of thought developed from the traditional Keynesian insights tries to offer additional explanations, based on microeconomic foundations, for such phenomena as economy-wide fluctuations ...

Among mainstream academic economists and policymakers, the leading alternative to the real business cycle theory is the New Keynesian model. Whereas the real business cycle model features monetary neutrality and emphasizes that there should be no active stabilization policy by governments, the New Keynesian model builds in a friction that generates monetary non-neutrality and gives rise to a we...

This paper is part of a broader project that provides a microfoundation to the General Theory of J. M. Keynes. I call this project “old Keynesian economics” to distinguish it from new-Keynesian economics, a theory that is based on the idea that to make sense of Keynes we must assume that prices are sticky. I describe a multi-good model in which I interpret the definitions of aggregate demand an...

1. Scope of Macroeconomics 2. The Keynesian View of Unemployment 2.1 A Simple Keynesian Model 2.2 Extension of the Simple Keynesian Model: A Capital Scarce, Labor Surplus Economy 2.3 Further Extension: Industry and Agriculture 3. Money, Keynes, and the Classics 3.1 The Classical Theory of Employment 3.2 The Keynesian Revolution 3.3 Friedman’s Counter-revolution 4. New Classical Macroeconomics 4...

Abstract The objective of this article is to carry out a review the links between institutional and post-Keynesian economics, in order raise possible compatibility even complementarity two branches economic thought. To end, we first question from perspective economics then post-keynesian standpoint. Next, methodological issues are addressed by presenting essential elements that characterize met...