At the risk of some oversimplification, the leading alternatives to the neoclassical / real business cycle model for understanding short run fluctuations are Keynesian models. I phrase this in the plural because there are multiple different versions of the Keynesian model, which differ in terms of how the aggregate supply block of the economy is formulated. Whereas neoclassical models emphasize...

A large market economy has a huge number of degrees of freedom with weak microlevel coordination. The ‘implicit microfoundations’ approach considers this property of micro-level interactions to more strongly determine macro-level outcomes compared to the precise details of individual choice behavior; that is, the ‘particle’ nature of individuals dominates their ‘mechanical’ nature. So rather th...

This paper provides a quantitative evaluation of the aggregate and distributional impacts of economy-wide microfinance or credit programs targeted toward small-scale businesses. In our analysis, we find that the redistributive impacts of microfinance are stronger in general equilibrium than in partial equilibrium, but the aggregate impacts are smaller. Making the typical microfinance program mo...

Although ARCH-related models have proven quite popular in finance, they are less frequently used in macroeconomic applications. In part this may be because macroeconomists are usually more concerned about characterizing the conditional mean rather than the conditional variance of a time series. This paper argues that even if one’s interest is in the conditional mean, correctly modeling the cond...

In principle, anything can serve these functions, and hence anything can serve as money. In fact, in the past, many different things have served as money. For many years commodities have served as money – thinks like cows, cigarettes, and precious metals (e.g. gold and silver). In more recent years, economies have moved towards fiat money. Fiat money are pieces of paper (or electronic entries) ...

Starting in the early 1990s, the New Open Economy Macroeconomics refers to a vast body of literature embracing a new theoretical framework for policy analysis in open economy, with the goal of overcoming the limitations of the Mundell-Fleming model, while preserving the empirical wisdom and policy friendliness of traditional analysis. Building general equilibrium models with imperfect competiti...

Economics, long thought beyond the reach of experimentation, began gradually to yield some of its inaccessible secrets to laboratory and field investigations over the past century. Observation and analyses of laboratory games have led economists to think about markets as social artifacts, whether evolved or designed, to achieve predictable outcomes in specified environments. The value of potent...

In the Keynesian model we thought of monetary policy as exogenous in the sense that the money supply, Mt, was set exogenously. This is useful for understanding the model but doesn’t really describe how monetary policy works in practice. In the real world, central banks adjust the money supply (and hence interest rates) endogenously in response to changing conditions. In this set of notes we dis...

thank David Weil, on whose notes substantial parts of the chapters on Money and Prices and Investment are based. Kyung Mook Lim and Wataru Miyanaga provided detailed corrections to typographical errors. Several classes of Brown students have provided suggestions and corrections. All remaining errors are mine.