Sunday, October 29, 2006
Macroeconomics in one word is "DECEPTIVE".
It's draws you in with fancy undergrad texts like the one's by Fischer and Mankiw.. an dyou think, out of the lot, Macro prob has most relevance to reality.
But then you learn more and you learn that while it may still be relevant, it's a long way off to get there. Modelling reality on a large scale must not be underestimated, as I have foolishly done.
Bad enough we had to deal with seven schools of thought, as Phelps put it:
1)Keynes
2)Monetarist-Friedman
3)New classical-Samuelson and Phelps(this guy is apparently dicey..bounces from one to the other as and when convenient- in one word-"practical")
4) the New Keynesian(Mankiw et al. ..sigh!)
5)Supply side stuff
6)Neo Neo Classical RBC
7)the structuralists
and each one put it's own spin to data..
The Neo neo classical currently incorporates a little bit of everything..and is being used as a placatory school of thought. But one knows, somebody out there is coming up with the Neo Neo Keynesian...I can't wait, Really.
It's draws you in with fancy undergrad texts like the one's by Fischer and Mankiw.. an dyou think, out of the lot, Macro prob has most relevance to reality.
But then you learn more and you learn that while it may still be relevant, it's a long way off to get there. Modelling reality on a large scale must not be underestimated, as I have foolishly done.
Bad enough we had to deal with seven schools of thought, as Phelps put it:
1)Keynes
2)Monetarist-Friedman
3)New classical-Samuelson and Phelps(this guy is apparently dicey..bounces from one to the other as and when convenient- in one word-"practical")
4) the New Keynesian(Mankiw et al. ..sigh!)
5)Supply side stuff
6)Neo Neo Classical RBC
7)the structuralists
and each one put it's own spin to data..
The Neo neo classical currently incorporates a little bit of everything..and is being used as a placatory school of thought. But one knows, somebody out there is coming up with the Neo Neo Keynesian...I can't wait, Really.
# posted by qq @ 1:34 AM 
Comments:
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At any point of time, the thinking of economists especially "currently in consensus" school of thought directly influences future market behaviour. (eg. More Investment decisions made using the consensus model@that time.)
So in essence, the thinking behind how the market works is affecting its future workings. What are the implications of this? Does this not mean that we're gonna keep having new("in-retrospect")schools of thought infinitely?
You ought to be glad that there are only 7 till now eh...
So in essence, the thinking behind how the market works is affecting its future workings. What are the implications of this? Does this not mean that we're gonna keep having new("in-retrospect")schools of thought infinitely?
You ought to be glad that there are only 7 till now eh...
# posted by 
: 6:00 PM
: 6:00 PM
It's straightforward link. MAcro economic models for central banks(usually targetting inflation or interest rate..not exchange rate like Singapore(maverick))are fixed for a period of time.Unexpected reformulation of the model lead to speculative gains. What model they use is usually known to all..when they make the changes is a speculative thing. The schools of thought is used to solve some kind of identity crises of economists and is generally a waste of time, and used becoz it sounds fancy. They don't matter over a long period to markets, cause markets only need to know what the central bank is doing, and it's teh central banks headache to choose what path to follow.
In essence you(the market representative) shouldn't be too bothered about schools of thought. It's a tool that economists use to sometimes fit in..
I hope I made some sense
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In essence you(the market representative) shouldn't be too bothered about schools of thought. It's a tool that economists use to sometimes fit in..
I hope I made some sense
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