Keynes and Modern Macroeconomics

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2008-6

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Semmler, Willi
Gong, Gang

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Recently, the dynamic general equilibrium (DGE) model, or its more popular version, the Real Business Cycle Model, has become a dominant paradigm in macroeconomics. Also many New Keynesians have embraced this new paradigm. Keynes in his General Theory has extensively responded to and criticized classical economics that was dominant at his time. This paper elaborates on how Keynes would have responded to this new paradigm. Moreover, we discuss some major macroeconomic issues and show of how differences in traditional Keynesian and the DGE models may arise. We also elaborate of why certain Keynesian ideas can usefully be applied to modern macroeconomics which may help to resolve some important puzzles of modern macroeconomic theory.

Subject Keywords

Keynesian Economics, DGE Models, Non-Clearing Markets, Business Cycles

URI

https://hdl.handle.net/11511/58401

Journal

ODTÜ Gelişme Dergisi

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Department of Economics, Article

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Citation Formats

W. Semmler and G. Gong, “Keynes and Modern Macroeconomics,” ODTÜ Gelişme Dergisi, vol. 35, no. 1, pp. 29–59, 2008, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/58401.