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Should-Read: Fabio Ghironi: Micro Needs Macro

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Should-Read: Fabio Ghironi: Micro Needs Macro: “An emerging consensus on the future of macroeconomics views the incorporation of a role for financial intermediation, labor market frictions, and household heterogeneity in the presence of uninsurable unemployment risk as key needed extensions to the benchmark macro framework… http://faculty.washington.edu/ghiro/GhiroFuture.pdf …I argue that this is welcome, but not sufficient for macro and international macro to tackle the menu of issues that have been facing policymakers since the recent global crisis. For this purpose, macro needs more micro than the benchmark setup has been incorporating so far. Specifically, artificial separations between business cycle analysis, the study of stabilization policies, and growth macro, as well as

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Should-Read: Fabio Ghironi: Micro Needs Macro: “An emerging consensus on the future of macroeconomics views the incorporation of a role for financial intermediation, labor market frictions, and household heterogeneity in the presence of uninsurable unemployment risk as key needed extensions to the benchmark macro framework… http://faculty.washington.edu/ghiro/GhiroFuture.pdf

…I argue that this is welcome, but not sufficient for macro and international macro to tackle the menu of issues that have been facing policymakers since the recent global crisis. For this purpose, macro needs more micro than the benchmark setup has been incorporating so far. Specifically, artificial separations between business cycle analysis, the study of stabilization policies, and growth macro, as well as between international macroeconomics and international trade, must be overcome. I review selected literature contributions that took steps in this direction; outline a number of important, promising directions for future research; and discuss methodological issues in the development of this agenda…

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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