De Grauwe, P;
Ji, Y;
(2018)
Behavioural Economics is Useful Also in Macroeconomics: The Role of Animal Spirits.
Comparative Economic Studies
, 60
(2)
pp. 203-216.
10.1057/s41294-018-0061-9.
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Abstract
Dynamic stochastic general equilibrium models are still dominant in mainstream macroeconomics, but they are only able to explain business cycle fluctuations as the result of exogenous shocks. This paper uses concepts from behavioural economics and discusses a New Keynesian macroeconomic model that generates endogenous business cycle fluctuations driven by animal spirits. Our discussion includes two applications. One is on the optimal level of inflation targeting under a zero lower bound constraint. The other is on the role of animal spirits in explaining the synchronization of business cycles across countries.
| Type: | Article |
|---|---|
| Title: | Behavioural Economics is Useful Also in Macroeconomics: The Role of Animal Spirits |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1057/s41294-018-0061-9 |
| Publisher version: | https://doi.org/10.1057/s41294-018-0061-9 |
| Language: | English |
| Additional information: | © Association for Comparative Economic Studies 2018. This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Animal spirits; Behavioural macroeconomics; Monetary policy; Inflation target; Zero lower bound; Business cycles |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10046525 |
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