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Macroeconomics for the 21st Century: Full Employment as a Policy Goal

Published online by Cambridge University Press:  26 March 2020

Roger E.A. Farmer
Roger E.A. Farmer*
Affiliation:
University of California Los Angeles, National Bureau of Economic Research, and Centre for Economic Policy Research
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Abstract

This paper describes research that integrates Keynesian and Walrasian economics in a new way. The author develops a model in which high unemployment can persist and any unemployment rate can occur as an equilibrium. Equilibrium is selected by the self-fulfilling beliefs of asset market participants. Using this new framework, the author argues that fiscal policy is not the best solution to the problem of restoring full employment. A policy of asset market management, similar to quantitative easing, is put forward as a more effective approach.

Keywords

UnemploymentKeynesian economicsquantitative easingfinancial crisisE2E24E40E50
Type
Research Articles
Information
National Institute Economic Review , Volume 211 , January 2010 , pp. R45 - R50
Copyright
Copyright © 2010 National Institute of Economic and Social Research

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Footnotes

∗

This paper summarises work presented at the 6th Euroframe Conference on Economic Policy Issues in the European Union, 'Causes and consequences of the current financial crisis: what lessons for European Union countries?' held on 12 June 2009 at the British Academy. I would like to thank Ray Barrell and Catherine Mathieu for inviting me to present my work, the Economic and Social Research Council for their sponsorship and participants at the conference for their comments. I also thank the National Science Foundation for their support of this research under grant SBR 0720839.

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