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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 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