Event Details

This Seminar is hosted by the Economics Department

Paul De Grauwe will present “Behavioural Macroeconomics. Towards a New Paradigm”

Abstract: There is a need to provide for an alternative to the standard macroeconomic models. Thatis what I do in this lecture. I present a behavioral macroeconomic model in which agents experience cognitive limitations preventing them from having Rational Expectations. Instead they use simple heuristics to forecast and they evaluate the performance of these simple rules. They are willing to switch to the better performing rule. I discuss the functioning of the model and its main results. I show how it provides for a true endogenous business cycle theory based on a dynamics of “animal spirits”, and contrast this with the standard macroeconomic models. I also analyse some policy implications