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Joe Steinberg
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I see what you mean now. I can't figure out why there's no learning either.
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I think it's reasonable to call a model-generated recession Keynesian if it can occur in the absence of any shocks to "fundamentals" like technology, preferences, endowments, etc. A recession generated by an aggregate shock to expectations that makes people more likely to believe a bad equilibrium will occur is a Keynesian recession in its most basic form in my mind. But yeah, the model is a little funny. Without the one-to-one island-matching construction it doesn't seem like any of the results would work out.
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I think you can have a Keynesian coordination failure recession in a model without money. When George-Marios Angeletos was presenting his paper http://www.econ.umn.edu/macro/papers/2011_Angeletos-LaO.pdf at the Minnesota Macro Workshop in July, Bob Lucas pointed out that this is exactly what's going on in their model (which has no monetary exchange).
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Sep 15, 2011