We develop a simple Keynesian type business cycle model in which heterogeneous agents are either optimistic or pessimistic. If the majority of the agents are optimistic, then consumption expenditures are high and the economy booms, otherwise consumption expenditures are low and the economy is in a recession. Within our model, the sentiment of the agents is affected by their social interactions....

This paper estimates a structural New Keynesian model to test whether globalization has changed the behavior of U.S. macroeconomic variables. Several key coefficients in the model – such as the slopes of the Phillips and IS curves, the sensitivities of domestic inflation and output to “global” output, and so forth – are allowed in the estimation to depend on the extent of globalization (modeled...

We use successive datasets from the U.K. Family Expenditure Survey to estimate a closed form consumption function for households facing uncertain future income. The closed form is derived from a model of absolute risk aversion modi ̄ed to re°ect di®erences in consumers' circumstances (quasi-relative risk aversion). Proper adjustment is made for demographic effects. Plausible estimates for the in...

A growth model is developed for an open dual economy. Th e economy expands due to a higher growth rate of labour productivity in the modern sector through the Kaldor-Verdoorn channel and higher eff ective demand through a Keynesian channel. Th e model incorporates a retardation mechanism aff ecting the slopes of productivity and output growth schedules as labour surplus and economies of scale d...