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How Macroeconomists Lost Control of Stabilization Policy: Towards Dark Ages

Abstract : This paper is a study of the history of the transplant of mathematical tools using negative feedback for macroeconomic stabilization policy from 1948 to 1975 and the subsequent break of the use of control for stabilization policy which occurred from 1975 to 1993. New-classical macroeconomists selected a subset of the tools of control that favored their support of rules against discretionary stabilization policy. The Lucas critique and Kydland and Prescott's time-inconsistency were overstatements that led to the "dark ages" of the prevalence of the stabilization-policy-ineffectiveness idea. These overstatements were later revised following the success of the Taylor (1993) rule.
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https://halshs.archives-ouvertes.fr/halshs-02978527
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Submitted on : Monday, October 26, 2020 - 3:09:30 PM
Last modification on : Tuesday, January 19, 2021 - 11:09:09 AM
Long-term archiving on: : Wednesday, January 27, 2021 - 6:59:11 PM

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Jean-Bernard Chatelain, Kirsten Ralf. How Macroeconomists Lost Control of Stabilization Policy: Towards Dark Ages. 2020. ⟨halshs-02978527⟩

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