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Of course RBC assumptions about inherent limitations of the market to clear at certain times, about which nothing can be done, blows up if we take account of debt to GDP, as does Steve Keen, and take measures to deal with those implications in light of MMT and three sector national accounting.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 4th, 2013 at 02:02:07 PM EST
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RBC makes no assumptions about the inability of the market to clear.  Markets always clear in RBC models.  RBC models have instantaneous price adjustment, perfect competition, etc.

To get markets that don't clear, you have to add (usually nominal) rigidities and imperfect competition, at which point your model becomes New Keynesian rather than RBC.

(NK models perform a lot better at forecasting, but a lot better than "fucking terrible" is still not good.  Put it this way: Last I read, internal Federal Reserve forecasts were still putting both to shame.)

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Tue Aug 6th, 2013 at 07:46:43 AM EST
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