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Uncertainty, Policy Ineffectiveness, and Long Stagnation of the Macroeconomy

Author

Listed:
  • Masanao Aoki

    (Department of Economics, University of California, Los Angeles)

  • Hiroshi Yoshikawa

    (Faculty of Economics, University of Tokyo)

Abstract

The standard analysis in macroeconomics depends on the assumption of the representative agent. However, when the degree of uncertainty becomes significant, we cannot ignore a simple fact that the macroeconomy consists of a large number of heterogeneous agents. In this paper, we demonstrate the importance of the combinatory aspect. Specifically, the effectiveness of policy necessarily weakens as the degree of uncertainty rises. One might call this probrem "uncertainty trap". This may contribute to long stagnation of the macroeconomy.

Suggested Citation

  • Masanao Aoki & Hiroshi Yoshikawa, 2003. "Uncertainty, Policy Ineffectiveness, and Long Stagnation of the Macroeconomy," CIRJE F-Series CIRJE-F-197, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2003cf197
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    References listed on IDEAS

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    Cited by:

    1. Boris Cournède & Diego Moccero, 2009. "Is there a Case for Price-level Targeting?," OECD Economics Department Working Papers 721, OECD Publishing.
    2. Paulo Mota & José Varejão & Paulo Vasconcelos, 2015. "A hysteresis model-based indicator for employment adjustment rigidity," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(3), pages 547-569, August.
    3. Belke, Ansgar & Kotz, Hans-Helmut & Paul, Stephan & Schmidt, Christoph M. (ed.), 2009. "Wirtschaftspolitik im Zeichen europäischer Integration: Festschrift für Wim Kösters anlässlich seines 65. Geburtstages," RWI Schriften, RWI - Leibniz-Institut für Wirtschaftsforschung, volume 83, number 83.
    4. Toshihiro Shimizu, 2017. "Heterogeneity of expectations and financial crises: a stochastic dynamic approach," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(3), pages 539-560, October.
    5. Masanao Aoki, 2004. "New Frameworks for Macroeconomic Modelings: Some Illustrative Examples," UCLA Economics Online Papers 306, UCLA Department of Economics.

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