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Big Ideas in MacroeconomicsA Nontechnical View$
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Kartik B. Athreya

Print publication date: 2013

Print ISBN-13: 9780262019736

Published to MIT Press Scholarship Online: May 2014

DOI: 10.7551/mitpress/9780262019736.001.0001

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Benchmark Macroeconomic Models and Policy Advice

Benchmark Macroeconomic Models and Policy Advice

(p.207) 5 Benchmark Macroeconomic Models and Policy Advice
Big Ideas in Macroeconomics

Kartik B. Athreya

The MIT Press

Versions of the ADM model are the starting point for much macroeconomic analysis. But how can such models possibly play any role at all in organizing macroeconomists’ thinking? After all, not only is the baseline ADM model abstract, it also seems incapable of describing a world that lasts more than one period, especially when that world features uncertainty that only slowly resolves itself. This chapter explores how an alternative trading arrangement, known as the Radner model, helps us adapt the ADM model to interpret real world data. We then learn about the central class of long-run macroeconomic models, known as “growth models” in which the Radner model of trading plays a central role. Lastly, we’ll see how engaged macroeconomics is with issues of inequality and heterogeneity.

Keywords:   Time and Uncertainty, Radner model, Malthusian model, Solow Model, Ramsey-Cass-Koopmans model, SIM model, OG model, Search model

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