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Structural Reform and Economic Policy - download pdf or read online

By Robert M. Solow (eds.)

ISBN-10: 0230524443

ISBN-13: 9780230524446

ISBN-10: 1349518654

ISBN-13: 9781349518654

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My question is: what should a reasonable person think about all this? Obviously that depends on why the intellectual landscape has changed so drastically. Is it because the nature of the economy has evolved, so that what used to be true is no longer so? Or is the economy pretty much the same, at least in these respects, but our 23 24 Is Fiscal Policy Possible or Desirable? theoretical understanding has evolved, so that what we were thinking forty years ago was false even then? We better be clear about one basic point.

That strikes me as a very low hurdle for a powerful model to jump. In particular, one has to wonder if there are not scores of alternative models that could pass a similar test with a similar degree of success, in which case the evidentiary value of the test is negligible. To revert to an earlier language again, this kind of testing (like much empirical work in economics, I fear) seems to pay no attention to the power of the test against reasonable alternatives, although that would seem to be very important in just these circumstances.

Rebelo (1988) ‘Production, Growth and Business Cycles I: The Basic Neo-Classical Model’, Journal of Monetary Economics, vol. 21, pp. 195–232. Kydland, F. and E. Prescott (1982) ‘Time to Build and Aggregate Fluctuations’, Econometrica, vol. 50, pp. 1345–70. Lucas, R. (1977) ‘Understanding Business Cycles’, Carnegie–Rochester Conference Series on Public Policy, vol. 5, pp. 7–29. 4 Institutional Interactions in Open Economies: Implications for EMU Markus Knell∗ Economic Studies Division, Oesterreichische Nationalbank, Vienna, Austria 1 Introduction In this chapter we analyse how the interactions between three groups of institutional actors – firms, unions and central banks – in two open economies determine output and employment in these countries.

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Structural Reform and Economic Policy by Robert M. Solow (eds.)


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