Logo
Munich Personal RePEc Archive

A demand-driven search model with self-fulfilling expectations: The new `Farmerian' framework under scrutiny

Gelain, Paolo and Guerrazzi, Marco (2014): A demand-driven search model with self-fulfilling expectations: The new `Farmerian' framework under scrutiny.

[thumbnail of MPRA_paper_55773.pdf]
Preview
PDF
MPRA_paper_55773.pdf

Download (406kB) | Preview

Abstract

In this paper, we implement Bayesian econometric techniques to analyze a theoretical framework built along the lines of Farmer's micro-foundation of the General Theory. Specifically, we test the ability of a demand-driven search model with self-fulfilling expectations to match the behaviour of the US economy over the last thirty years. The main findings of our empirical investigation are the following. First, all over the period, our model fits data very well. Second, demand shocks are the most relevant in explaining the variability of concerned variables. In addition, our estimates reveal that a large negative demand shock caused the Great Recession via a sudden drop of confidence. Overall, those results are consistent with the main features of the New 'Farmerian' Economics as well as to latest demand-side explanations of the finance-induced recession.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.