Macroeconomics

Definition and objects of analysis

By considering from the start the relations between the large aggregates of the economy, the macroeconomics seeks to clarify these relations and to predict their evolution vis-a-vis a modification of the conditions, which it is of a shock (increase of oil price) or about a Economic policy deliberated. Contrary to the Microéconomie, which supports the reasoning in partial balance, the macroeconomics is always placed from the point of view of general stability, which leads it to give more attention to the Bouclage of the models and the dynamics of creation and maintenance of essential Institution S, like the Marché S, the Monnaie.

Started from very simple relations, with the image of the Model IS/LM connecting the market of the capital and that of the currency or the Curve of Philips connecting inflation and unemployment, the macroeconomics evolved to the construction of complex economic models including at the same time relations supposed between variables and of the countable relations being used to define the aggregates. Very much used to analyze and envisage the results of the economic policies, these vast models (roughest comprise ten the equations, most complex exceed them: 1500) are at present employed by the majority of the governments, statistical institutions (like INSEE), international organizations (OECD) and certain private actors wanting to have their own forecasts as for the Conjoncture.

History

Before 1945

The authors traditional S as well as the Physiocrat S and the Mercantiliste S reasoned at the same time on behavior individual (microeconomic S by definition) and on directly macroeconomic relations. Karl Marx did not make in the same way the difference between these two fields. Attached before very describing what they observed, these economists did not have the formalism nor of the tools allowing to show the inconsistencies existing between the assumptions on the individual behaviors and those relating to the aggregates.

Initially, the founders of the neo-classic school used at the same time directly macroeconomic relations and the transposition of individual behaviors on the scale of the economy (one can quote various versions of the Quantity theory of money). However, their will of rigor, been used by the mathematical formalism as their attachment for the methodological Individualisme led these economists to try to base their results only on the behaviors of individual agents, rejecting as stripped of base the assumptions on the behavior of the economy as a whole independently of the decisions of the agents.

Keynes and the emergence of the macroeconomics

The systematic distinction, in so far as it can really be done, between microeconomy and macroeconomics emerges however really only during the the Thirties around work of John Maynard Keynes. It was especially the repercussion of its general Théorie of employment, the interest and the currency (1936) post-war period which led to a clear separation, initially in the academic medium, of the two fields. The microeconomy then specialized on the problems of Allocation of the resources by the means of the relative prices, whereas the macroeconomics studied the aggregate output and the price level.

Two ways of the years 1980 - 1990

Chipped by the failure of the keynésiens to envisage and stop the consecutive Stagflation with the oil crises, the macroeconomics of the end of the XXe century presented a double face.

Refinement of modeling

On the one hand, one attended the construction of increasingly complex and elaborate models, construction made possible by the increase in the capacities of calculation of the computers as well as the generalization of the techniques of dynamic Optimization. This way was also supported by the considerable improvement of the data the macroeconomists had to test their models (see Macroéconométrie). It appeared however that the complexification of the models did not bring large - thing as regards explanatory capacity, and that the problems of coherence became not easily surmountable with such a great number of equations. The whole of the approach was also called into question by the Critique of Lucas, the economist Robert Lucas Jr pointing out that the macroeconomic relations failed to take into account the reactions of agents informed with the economic policies (see Courbe from Philips and Critique of Lucas)

Neo-classic synthesis and representative agent

In addition, of the economists trained with the neo-classic Microéconomie sought to give microeconomic bases to the aggregates observed, while deriving from the sizes as or the investment supply of labor of the offers of the microeconomic models. These attempts, known under the name of neo-classic Synthesis, failed however on the Problème of aggregation, with results showing that this passage of the micro level at the macro level was not possible that by imposing assumptions absurdly restrictive on the behavior of the agents (see general stability).

The neo-classic approach then had recourse to the concept of representative Agent, supposing that the economic aggregates behaved as if they answered the decisions of a Economic agent single similar to the rational agent of the microeconomic level. The capacity of these models to predict results opposed according to the assumptions made on the representative agent and the basic parameters threw a major doubt on the relevance of this approach.

Macroeconomics today

At the beginning of XXIe century, economists seek to exceed the distinction between microeconomy and macroeconomics. The majority of the current macroeconomic models assume the fact that they constitute only one simplification of the reality, of which they study a particular aspect, like the effect of the innovation on the growth, or of the monetary structures on the investment. So they mix macroeconomic relations and extensions at the macroeconomic level of microeconomic relations in so far as these extensions are compatible with the stylized Faits that one seeks to analyze.

There exists however of many schools and currents of thought separated by deep ditches touching with their methodological design and their recommendations as regards economic policies.

Schools and currents of thought

Several schools use macroeconomic reasoning in practice, with principles and recommendations very different

the current keynésien which recommends the intervention of the State on the economy in order to leave the situations of balance of Sous-emploi while acting on the level of the effective request. The economists of this current indicate themselves like the Post-keynésien S , to be different from the generation of the new keynésiens , which sought microeconomic bases with the macro relations postulated by Keynes.
the current monetarist which considers that the currency is relatively disconnected from fundamental from the real economy, and that consequently to act on the monetary phenomena (to fight inflation or deflation, for example, or to deal with problems of foreign exchange rate), it is necessary to act on the currency (by the piloting of interest rates, or the regulation of the monetary emissions) and not on the real economy via the effective request as the Keynésianisme recommends it. Conversely, they affirm that it is useless to seek to solve problems of Chômage or of Investissement by a Monetary policy. They are of this fact at the origin of the independence of the central banks.
the neo-classic current which privileges the analyzes at the nonaggregate level and generally recommends budgetary stability.
the current Néo-keynésien, which stresses that the formalization of the ideas of Keynes in models brought to neglect dimensions of Incertitude, power stations in the thought of Keynes.
the current of the economic Marxism.
the school of the regulation.
the school of the circuit: Its principal French representatives are Alain Parguez and Bernard Schmitt. The theory of the circuit is opposed clearly to the neo-classic theory by the place which it gives to the circuit and the currency. Contrary to the neo-classic theory which sees the currency like a neutral element in the operation of the economic system (like mere intermediary of the exchanges), the theory of the circuit establishes its analysis on the thesis of the endogenous currency.

See too

Microéconomie

Macroeconomic concepts

Balance of payments - Central bank - Unemployment - Curve of Philips - political Economy - Inflation - Model IS/LM - Currency - Budget policy - Economic policy - Monetary policy - Gross domestic product (GDP) -…

External bonds

Presentation of the macroeconomics in the year 2000

References

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