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MACROECONOMIC THOUGHTS.PART 2

The Keynesians that came later were able to devise models that take into consideration, price level changes and inflation, even though Keynes himself barely treated the influence of money supply on inflation. Although some Keynesians opposed the synthesis method of combining Keynes theory with an equilibrium methods,adopted disequilibrium method instead, still they were able to adopt Philips curve to Model for price level changes.The generation of economists that came after Keynes , the monetarists led by Milton Friedman, also noted the setback, though adopted some of Keynes ideas, and advocated the significance of money demand and the role of money supply in inflation. The generation of Robert Luca , the new classical economists did not spare criticism  either challenged Keynesian model that failed to work under rational expectation and empirical models with lack lustre micro economic foundations. The new classical school metamorphosed into real business cycles . Both assumed that markets clear  and that changes in business cycle are not by demand but driven by changes in technology and supply . The criticism leveled by Lucas and other new classical economists,were also addressed by new Keynesians and they adopted rational expectation and built  empirical models laden with microfoundation of robust prices, with the notion that suggested recession  could still be explained by demand factors given rigidities to stop prices from crashing to market clearing level with surplus of goods and labor.The new neoclassical synthesis combined elements of new classical and new Keynesian into the consensus and were noted for the new neoclassical synthesis. Those who avoided their debate had gone ahead to devise new growth theories of longterm economic growth. The blogger himself a lay economist of the school of marsolism sometimes with bias for the Austrian school proposed new models and debt macroeconomics, given his skepticism of the emergence and growing gravity of the heterodox economics which is bound to plunge western economies into new palavers of monumental economic crisis.


This post first appeared on Kunle Microfinance, please read the originial post: here

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MACROECONOMIC THOUGHTS.PART 2

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