Working Paper: NBER ID: w23836
Authors: Fabio Ghironi
Abstract: An emerging consensus on the future of macroeconomics views the incorporation of a role for financial intermediation, labor market frictions, and household heterogeneity in the presence of uninsurable unemployment risk as key needed extensions to the benchmark macro framework. I argue that this is welcome, but not sufficient for macro—and international macro—to tackle the menu of issues that have been facing policymakers since the recent global crisis. For this purpose, macro needs more micro than the benchmark setup has been incorporating so far. Specifically, artificial separations between business cycle analysis, the study of stabilization policies, and growth macro, as well as between international macroeconomics and international trade, must be overcome. I review selected literature contributions that took steps in this direction; outline a number of important, promising directions for future research; and discuss methodological issues in the development of this agenda.
Keywords: No keywords provided
JEL Codes: E10; E32; E52; F12; F23; F40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| traditional macroeconomic models (E19) | understanding the dynamics of economic crises and recoveries (F44) |
| lack of consideration of producer-level dynamics (D20) | failure of many firms during the global financial crisis (F65) |
| producer-level dynamics (C69) | understanding unemployment and economic productivity (E24) |
| financial market conditions (G19) | firm behavior (D21) |
| microeconomic factors (F61) | robust macroeconomic framework (E60) |
| separation of business cycle analysis and growth macroeconomics (E32) | understanding long-term economic performance (P17) |