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The hedgehog and the fox : from DSGE to Macro-Pru
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Miller, Marcus and Zhang, Lei (2015) The hedgehog and the fox : from DSGE to Macro-Pru. The Manchester School, 83 . pp. 31-55. doi:10.1111/manc.12119 ISSN 1463-6786.
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Official URL: http://dx.doi.org/10.1111/manc.12119
Abstract
Prior to the financial crisis of 2008/9, DSGE models-without-money set a new standard in applied macroeconomics; and they were widely adopted by Central Banks to help achieve their inflation targets. Controlling inflation did not deliver financial stability, however: far from it. The appeal of macro-models based on ‘efficient financial markets’ surely contributed to over-confidence before the crisis. But what about externalities? We examine, in particular, how steps to mitigate microeconomic principal/agent problems can create macroeconomic externalities—‘financial accelerators’ that affect balance sheets in pro-cyclical fashion. Now is the time, we argue, to embrace such a wider perspective.
Item Type: | Journal Article | ||||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||||
Divisions: | Faculty of Social Sciences > Economics | ||||||
Library of Congress Subject Headings (LCSH): | Macroeconomics -- Mathematical models, Equilibrium (Economics), Global Financial Crisis, 2008-2009 | ||||||
Journal or Publication Title: | The Manchester School | ||||||
Publisher: | Wiley-Blackwell Publishing Ltd. | ||||||
ISSN: | 1463-6786 | ||||||
Official Date: | 25 August 2015 | ||||||
Dates: |
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Volume: | 83 | ||||||
Page Range: | pp. 31-55 | ||||||
DOI: | 10.1111/manc.12119 | ||||||
Status: | Peer Reviewed | ||||||
Publication Status: | Published | ||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||
Date of first compliant deposit: | 12 February 2018 | ||||||
Date of first compliant Open Access: | 12 February 2018 |
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