Handbook of macroeconomics: In 3 vol.
The Handbook of Macroeconomics aims to provide a survey of the state of knowledge in the broad area that includes the theories and facts of economic growth and economic fluctuations, as well as the consequences of monetary and fiscal policies for general economic conditions.
Macroeconomics underwent a revolution in the 1970's and 1980's, due to the introduction of the methods of rational expectations, dynamic optimization, and general equilibrium analysis into macroeconomic models, to the development of new theories of economic fluctuations, and to the introduction of sophisticated methods for the analysis of economic time series. These developments were both important and exciting. However, the rapid change in methods and theories led to considerable disagreement, especially in the 1980's, as to whether there was any core of common beliefs, even about the defining problems of the subject, that united macroeconomists any longer.
The 1990's have also been exciting, but for a different reason. Modern methods of analysis have progressed to the point where they are now much better able to address practical or substantive macroeconomic questions--whether traditional, new, empirical, or policy related. Indeed, it is no longer necessary to choose between more powerful methods and practical policy concerns. The Editors believe that both the progress and the focus on substantive problems has led to a situation in macroeconomics where the area of common ground is considerable, though they cannot yet announce a "new synthesis" that could be endorsed by most scholars working in the field. For this reason the Handbook is organized around substantive macroeconomic problems, and not around alternative methodological approaches or schools of thought.
The extent to which the field has changed over the past decade is considerable. This Handbook is a response to the great need for the survey of the current state of macroeconomics.
The Handbook of Macroeconomics includes 26 chapters, arranged into seven parts. Part 1 reviews evidence on the Empirical and Historical Performance of the aggregate economy, to provide factual background for the modeling efforts and policy discussion of the remaining chapters. It includes evidence on the character of business fluctuations, on long-run economic growth and the persistence of cross-country differences in income levels, and on economic performance under alternative policy regimes.
Part 2 on Methods of Dynamic Analysis treats several technical issues that arise in the study of economic models which are dynamic and in which agents' expectations about the future are critical to equilibrium determination. These include methods for the calibration and computation of models with intertemporal equilibria, the analysis of the determinacy of equilibria, and the use of "learning" dynamics to consider the stability of such equilibria. These topics are important for economic theory in general, and some are also treated in the Handbook of Mathematical Economics, The Handbook of Econometrics, and the Handbook of Computational Economics, for example, from a somewhat different perspective. Here we emphasize results - such as the problems associated with the calibration of general equilibrium models using microeconomic studies - that have particular application to macroeconomic models.
The Handbook then turns to a review of theoretical models of macroeconomic phenomena. Part 3 reviews Models of Economic Growth, including both the determinants of long-run levels of income per capita and the sources of cross-country income differences. Both "neoclassical" and "endogenous" theories of growth are discussed. Part 4 treats models of Consumption and Investment demand, from the point of view of intertemporal optimization. Part 5 covers Models of Economic Fluctuations. In the chapters in this part we see a common approach to model formulation and testing, emphasizing intertemporal optimization, quantitative general equilibrium modeling, and the systematic comparison of model predictions with economic time series. This common approach allows for consideration of a variety of views about the ultimate sources of economic fluctuations and of the efficiency of the market mechanisms that amplify and propagate them.
Part 6 treats Financial Markets and the Macroeconomy. The chapters in this part consider the relation between financial market developments and aggregate economic activity, both from the point of view of how business fluctuations affect financial markets, and how financial market disturbances affect overall economic activity. These chapters also delve into the question of whether financial market behavior can be understood in terms of the postulates of rational expectations and intertemporal optimization that are used so extensively in modern macroeconomics--an issue of fundamental importance to our subject that can be, and has been, subject to special scrutiny in the area of financial economics because of the unusual quality of available data.
Finally, Part 7 reviews a number of Monetary and Fiscal Policy issues. Here we consider both the positive theory (or political economics) of government policymaking and the normative theory. Both the nature of ideal (or second-best) outcomes according to economic theory and the choice of simple rules that may offer practical guidance for policymakers are discussed. Lessons from economic theory and from experience with alternative policy regimes are reviewed. None of the chapters in this part focus entirely on international, or open economy, macroeconomic policies, because many such issues are addressed in the Handbook of International Economics. Nevertheless, open-economy issues cannot be separated from closed-economy issues as the analysis of disinflation policies and currency crises in this part of the Handbook of Macroeconomics, or the analysis of policy regimes in the Part I of the Handbook of Macroeconomics make clear.
Part 1: Empirical and Historical Performance.
1. Business cycle fluctuations in U.S. macroeconomic time series (J.H.
Stock, M.W. Watson).
2. Monetary policy shocks: what have we learned and to what end? (L.J. Christiano, M. Eichenbaum and C.L. Evans).
3. Monetary policy regimes and economic performance: the historical record (M.D. Bordo, A.J. Schwartz).
4. The new empirics of economic growth (S.N. Durlauf, D.T. Quah).
Part 2: Methods of Dynamic Analysis.
5. Numerical solution of dynamic economic models (M.S. Santos).
6. Interdeterminacy and sunspots in macroeconomics (J. Benhabib, R.E.A. Farmer).
7. Learning dynamics (G.W. Evans, S. Honkapohja).
8. Micro data and general equilibrium models (M. Browning, L. Hansen, and J. Heckman).
Part 3: Models of Economic Growth.
9. Neoclassical growth theory (R.M. Solow).
10. Explaining cross-country income differences (E.R. McGrattan, J.A. Schmitz, Jr.).
Part 4: Consumption and Investment.
11. Consumption (O.P. Attanasio).
12. Aggregate investment (R.J. Caballero).
13. Inventories (V.A. Ramey, K.D. West).
Part 5: Models of Economic Fluctuations.
14. Resuscitating real business cycles (R.G. King, S. Rebolo).
15. Staggered price and wage setting in macroeconomics (J.B. Taylor).
16. The cyclical behavior of prices and costs (J.J. Rotemberg, M. Woodford).
17. Labor-market frictions and employment fluctuations (R.E. Hall).
18. Job reallocation, employment fluctuations and unemployment (D.T. Mortensen, C.A. Pissarides).
Part 6: Financial Markets and the Macroeconomy.
19. Asset prices, consumption, and the business cycle (J.Y. Campbell).
20. Human behavior and the efficiency of the financial system (R.J. Shiller).
21. The financial accelerator in a quantitative business cycle framework (B. Bernanke, M. Gertler and S. Gilchrist).
Part 7: Monetary and Fiscal Policy.
22. Political economics and macroeconomic policy (T. Persson, G. Tabellini).
23. Issues in the design of monetary policy rules (B.T. McCallum).
24. Inflation stabilization and BOP crises in developing countries (G.A. Calvo, C.A. Vegh).
25. Government debt (D.W. Elmendorf, N.G. Mankiw).
26. Optimal fiscal and monetary policy (V.V. Chari, P.J. Kehoe).