Thursday, April 16, 2015

Michalis Nikiforos — Not All Macro Models Failed to Predict the Crisis

Noah Smith has a post on the failure of macro theory to predict the crisis. He concedes that DSGE models did very badly on this score, but, he continues, “There are no other models out there that did forecast the crisis” and there is no better alternative.
The word “better” is important here because some “angry heterodox” people have pointed Smith to at least one alternative—Wynne Godley’s Seven Unsustainable Processes—that had in fact predicted the crisis.….
Multiplier Effect
Not All Macro Models Failed to Predict the Crisis
Michalis Nikiforos

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