Brian Romanchuk — ZLB, R.I.P.

Even if one is not a fan of President-elect Trump, one must be impressed how he managed to shift expectations to end secular stagnation. With the Zero Lower Bound (ZLB) now dead as a door-nail, it is going to be difficult for mainstream economists to make it look like Dynamic Stochastic General Equilibrium (DSGE) models have something useful to tell us about the real world.

This article first discusses some of the academic theoretical issues around the ZLB, and then jumps to the latest economic squabbling based on Paul Krugman's recent comments.

Bond Economics
ZLB, R.I.P.
Brian Romanchuk

Simon Wren-Lewis — ZLB Models?

Tilting at windmills.

Worse:

Now at this point you may be thinking that I am just being a bit pedantic about labels. I am not sure I should apologise if I am, but I do have another motivation. Talk of different models that can be applied to the same problem harks back to ‘schools of thought’ days in macro. I think macro should be better than that now. For better or worse, the microfoundations project and the new neoclassical synthesis gave us a common language, where we could talk about different mechanisms within a shared approach. That should make the process of matching evidence to theory more straightforward.

What if the "shared approach" — shared by whom? — is off track? What if Keynes minus Samuelson, Hicks, neoclassical synthesis and NK monetarism is correct? What about the Post Keynesian crit

What would count for showing that the "shared approach" is offtrack? Missing the GFC and not being able to either explain it or fix the damage? What about the Post Keynesian critique that got it right and has a well-reasoned plan based on fiscalism instead of monetarism?

mainly macro
ZLB Models?
Simon Wren-Lewis | Professor of Economics, Oxford University