The Crisis of Macroeconomics:

Finance and inequality in post-crisis scholarship

Oddný Helgadóttir

Copenhagen Business School


Prior to the financial crisis of 2008, Dynamic Stochastic General Equilibrium (DSGE) modeling, the workhorse model of macroeconomics for the last thirty odd years, had little to say about shadow finance or economic inequality, both of which are now seen as key ingredients of the crisis. This paper asks how a structural discipline like mainstream macroeconomics reacts when it comes up against such serious anomalies. To shed light on this question the paper codes 115 relevant articles from three top economics journals. This coding revealed that while review articles and reflections on the state of the discipline express a great deal of existential angst and professional doubt, there has been limited change in the modeling practice of macroeconomists. While there has been some opening to non-DSGE methods, the majority of research articles still use this approach and there has also been a considerable effort to reconcile it with the events of the crisis.

The financial crisis of 2008 blindsided most people, economists included. As such it showed unequivocally that the New Neoclassical macroeconomic paradigm suffered from a serious streetlight problem: the spotlight of Dynamic Stochastic General Equilibrium (DSGE) modeling—the workhorse model of central banks and governments as well as the go-to approach of academic macroeconomists—had not been trained on the parts of the economy where risk had been building up, namely the shadow banking sector.[1] Shadow banking is financial activity that happens in non-deposit taking financial intermediaries that are not subject to reserve requirements as traditional banks are and which, before the crisis, were highly levered.[2] Because it was absent from mainstream macro models before the crisis, this enormous part of the financial ecosystem largely escaped the attention of both economists and regulators until it imploded with the onset of the financial crisis in 2008, draining the global economy of liquidity.

In other words, until it hit with full force, the sources of the crisis were effectively “invisible” to the established macroeconomic policy paradigm. Economist Willem Buiter put it this way: “Both the New Classical and New Keynesian complete markets macroeconomic theories not only did not allow questions about insolvency and illiquidity to be answered. They did not allow such questions to be asked.”[3] Thus, while the crisis was endogenous to the highly financialized global economy, for economists operating within the bounds of the prevailing paradigm, it was at once exogenous and shocking.

This working paper examines how the mainstream of macroeconomics has dealt with the existential blow dealt by the crisis of 2008. It asks, in other words, what happens when an established and structurally coherent system of thought comes up against its systemic blind spots? In order to examine this I coded all macroeconomic research from the three top journals in economics, as ranked by IDEA/Repec (Journal of Economic Literature (JEL), Journal of Political Economy (JPE), Quarterly Journal of Economics (QJE)) from the beginning of 2009 until April 2018. In total I looked at a 115 articles, 40 from JPE, 54 from JEL and 21 from the QJE.[4]

The JEL, one of the journals of the American Economics Association, primarily publishes review articles, book reviews and critical essays that summarize important developments and debates in the discipline. As such it is an excellent guide to which topics the discipline considers noteworthy at any given time. The JPE and the QJE, by contrast, are more traditional research-based journals that publish original research at the cutting edge of the discipline. In light of these differences I took a different approach to coding JEL articles, focusing on whether review articles took the crisis and its intellectual fallout into account or whether they could have appeared unchanged in the absence of a crisis. By contrast, in coding articles from the JPE and the QJE my attention was more narrowly focused on methodological developments since the crisis. I complemented the coding with a “deep reading” of the texts in order to not only shed light on method but also content. Here my focus was primarily on discussions of finance and inequality, as two key blind spots of pre-crisis mainstream macroeconomics.

Broadly, my coding reveals a profession experiencing a great deal of existential angst, but one that has not given up on its coordinating paradigm. Twenty-seven, or exactly half of the JEL articles coded, centered on the fallout from the crisis in some way, with a very small minority of articles defending the pre-crisis status quo while most criticized and questioned it.[5] As far as the JPE and the QJE go, there was an important difference between journals. In terms of methods, the JPE dug its heels in while the QJE opened up to more diverse methods with just under half of its articles relying on alternative approaches. Notably, the QJE published a number of articles that were concerned with growing economic inequality, while the JPE rarely broached the topic and, when it did, treated inequality as largely positive. Still, even where there was a circumscribed openness to alternative methods, DSGE modeling remained predominant and there do not seem to be any serious competitor paradigms on the horizon. In what follows of this section, I will discuss the content of these three journals in turn.

The Journal of Economic Literature: Handwringing overviews

While exactly half of the fifty-four macroeconomics articles that have appeared in the JEL since the crisis could have been written in the same way in the absence of a crisis—either because they center on unrelated topics or because they carry on as if nothing had happened at all—the other half conveys profound concern about the disciplinary state of affairs.[6]

Thus, a number of articles were dedicated to reviews of books and reports on the crisis, many of which stress obvious blind spots in macroeconomists’ understanding of finance.[7] Or, as Gary Gorton notes, “[m]any professional economists now find themselves answering questions from their students, friends, and relatives on topics that did not seem at all central until a few years ago, and we are collectively scrambling to catch up.” [8] Similarly, Andrew Lo, in an article reviewing twenty-one books on the crisis—only eleven of which were written by economists—concludes that “no single narrative emerges from this broad and often contradictory collection of interpretations, but the sheer variety of conclusions is informative, and underscores the desperate need for the economics profession to establish a single set of facts from which more accurate inferences and narratives can be constructed.”[9]

Not even leading financial experts escaped the refrain that they did not do justice to real-world finance in their analysis of the crisis: In his review of the Squam Lake Report, the goal of which was “to bring together some fifteen leading U.S. financial economists to see what regulatory changes they could jointly agree and thereby influence policy discussions”, Charles Goodhart concludes that the report suffers from serious blind spots and omissions, notably when it comes to the shadow banking sector: “Once one takes the view, as I do, that the main systemic failing has been to allow a huge leverage cycle to develop, this raises the question of whether it is appropriate in the design of regulatory reform to concentrate so much on banks alone. There are numerous other levered financial intermediaries...whether shadow banks, hedge funds, or mutual funds.”[10]

While finance was a frequent topic, inequality hardly got any column space, with the notably exception of Branko Milanovic’s review of Thomas Piketty’s Capital in the Twenty-First Century. The first lines of the review set the tone:

I am hesitant to call Thomas Piketty’s new book Capital in the Twenty-First Century (Le capital au XXI e siècle in the French original) one of the best books on economics written in the past several decades. Not that I do not believe it is, but I am careful because of the inflation of positive book reviews and because contemporaries are often poor judges of what may ultimately prove to be influential. With these two caveats, let me state that we are in the presence of one of the watershed books in economic thinking.

Thus, while economic inequality was not the subject of much discussion, Piketty’s intellectual contribution was treated as an important step in filling a key gap in the state of economic knowledge.

A number of articles argued that important blind spots in pre-crisis macroeconomics were a clear consequence of methodological shortcomings. For example, in questioning why it took the U.S. Federal Reserve and Treasury so long to see that a crisis was underway, Gary Gorton notes that, “‘seeing’ is a function of your paradigm” the obvious implication being that in this case the mainstream macroeconomic paradigm was a hindrance to seeing what was going on.[11] Serena Ng and Jonathan Wright write that:

This Great Recession is important not only because of its impact on the economic well-being of consumers and firms, but also because it once again led econometricians and macroeconomists to question the adequacy of their analysis. In conventional business cycle analysis, emphasis is placed on the fluctuations of macroeconomic variables alone. Asset prices, financial variables and the financial system are a sideshow. Yet, as noted by Minsky (1986) and Sinai (1992), financial market factors can be the primary causes of downturns...the role of financial markets in recent business cycles can no longer be seen as passive.[12]

Ricardo Lagos et al. argue that the inability to properly model money plays a particularly important role in generating serious blind spots:

In [cash in advance] models, having to use cash hurts; in sticky-price models, nothing but problems arise from having agents set prices in dollars and making it difficult or costly to change. If money were really such a hindrance, how did it survive all these centuries? The work reviewed here tries to get the relevant phenomena, like monetary or credit arrangements, to arise endogenously, as beneficial institutions. This can give different answers than reduced-form models, and allows additional questions. How can one purport to understand financial crises or banking problems using theories with no essential role for payment or settlement systems in the first place?[13]

Alan Kirman’s review of Colander and Kupers’ 2014 book Complexity and Economic Policy goes even further, questioning the very existence of equilibrium states—the bedrock of general equilibrium analysis. It concludes that, “we are far from Leon Walras’ dream of economics as a science like astrophysics.”[14]

A number of articles debated the multiplier effects of fiscal stimulus, a topic assumed to be a relic of the Keynesian era before the onset of the crisis. But here, again, methodological concerns were front and center:[15]

The administration turned to economists—significantly academic economists—to help craft the size and details of the stimulus package...But, almost as useless as no answer, academic economics provided a wide range of answers...The academic disagreement left policymakers using a multi-equation [Keynesian] macroeconomic forecasting model, one inconsistent with the best practices of modern macroeconomics…One major reason for our inability to answer the central question is methodological…Which conclusion you reach depends on your commitment to extant models…While historical analysis can potentially better determine the baseline expected dynamics of output and government spending and how they both change over time, the use of historical evidence is to some extent inherently subjective. (Of course in practice so too is the choice of tastes and technology in a DSGE model and the choice of variables in a VAR).[16]

All in all, it is clear that a number of macroeconomists find themselves in an existential lurch and uncertain of their discipline’s role in the policy world. Thus, Gorton laments the fact that in Timothy Geithner’s crisis memoir, “[e]conomics enters the memoir only with reference to “moral hazard,” Bagehot’s rule, and Kindleberger’s 1996 book Manias, Panics and Crashes, which is mentioned in passing. And that is a telling point for economists.Economists had little to offer in the way of policy advice during the crisis...since macroeconomic models cannot display crises.” On a similar note, Ariel Rubinstein sees Dani Rodrik’s new book Economics Rules as motivated by thorny fundamental questions: “what are the meaning and value of what we economists do? Any honest discussion of such a question is inevitably charged...Are we using our lives in the right way? Are we devoting ourselves to what we believe in? Or are we just following the crowd and afraid to rock the boat?”[17]

But how did these concerns out in practice when it came to research? It is one thing to express concern over the state of the discipline and quite another to carry that over into practice. Looking at research-centric journals reveals more continuity than troubled musings of this kind would suggest.

The Journal of Political Economy: Paradigm maintenance

Methodologically, the JPE stuck to its guns, championing DSGE analysis throughout the period of analysis. This means not only that almost all of the articles published in the journal made use of this approach—out of forty articles, thirty were DSGE-centric and the rest adhered to other well known methods such as case study analysis or vector auto-regressions—but also that the JPE published a number of articles that sought to make sense of the intellectual challenges posed by the crisis using the DSGE framework.[18]

This took two forms. First, a cluster of articles (including one where Robert Lucas is first author) tried to further the DSGE approach by pushing past the use of representative agents and incorporating two kinds of agents into models (e.g. agents are more or less productive, more or less wealthy, have weaker or stronger priors, hold divergent non-rational beliefs about the economy).[19]Such “heterogeneity” has the potential to make DSGE models even more versatile than they already are and to account for data that have not been explained through the lens of DSGE until now. However, this avenue is highly mathematically challenging and so the dimensions of heterogeneity that can be introduced remain quite constrained.

Secondly, a number of the articles published in JPE incorporated financial elements into macroeconomic DSGE models in novel ways.[20] For example, some scholars built financial data and asset prices into models to better predict macroeconomic outcomes.[21] Thus, Papanikolaou argues that, “[f]inancial data offer certain advantages relative to real economic quantities, in that they are forward looking and are available at high frequencies. Furthermore, the cross section of asset risk premia is informative about the properties of these macroeconomic shocks and their effect on the marginal utility of wealth of the representative household.”[22]

Others yet modeled various ways in which the crisis could have stemmed not from exogenous shocks, as an early strand of post-crisis scholarship that modeled adverse financial shocks argued, but rather been endogenous to the financial sector.[23] For example, stressing moral hazard, Myerson builds a model where the assumption that “[a] successful economy requires industrial concentrations of capital that are vastly larger than any typical individual’s wealth, and the mass of small investors must rely on specialists to do the work of identifying good investment opportunities…individuals who hold such financial power may be tempted to abuse it for their own personal profit” drove endogenous instability.[24] Similarly, Frédéric Boissay, Fabrice Collard and Frank Smets present a model “where bank heterogeneity gives rise to an interbank market with procyclical balance sheet [and] the market is subject to moral hazard and asymmetric information that can lead to sudden market freezes, banking crises, credit crunches and recessions.” Chao Gu, Fabrizio Mattesini, Cyril Monnet and Randall Wright set out to examine whether “credit markets susceptible to animal spirits, self-fulfilling prophecies, and endogenous fluctuations” and succeed in building a model that shows that “even if fundamentals are deterministic and time invariant, economies with credit market frictions can display cyclic, chaotic, and stochastic dynamics driven purely by beliefs.” [25]

A handful of articles even modeled some components of the shadow banking sector using DSGE models. Notably, Douglas Diamond and Raghuram Rajan show that anticipation of persistently low short-term interest rates can lead to socially excessive short-term leverage and incentives to hold excessively illiquid assets relative to social optima. What is more, that even if regulatory liquidity and capital requirements constrain bank actions ex ante, “unregulated parts of the financial system could benefit by setting up special vehicles that replicated bank structures”—practices that are at the heart of the shadow banking sector.[26] Others focused on the risks associated with collateralized borrowing in particular.[27] The JPE has thus taken pains to tackle questions of financial instability from within the mainstream paradigm, showing that DSGE modeling can account even for endogenous financial crises and shadow activity.

However, the journal has not been as open when it comes to another increasingly politically salient economics topic, namely wealth and income inequality. While inequality did feature in a handful of research articles, it was mostly treated as a given empirical reality that drove other outcomes—and in some of those cases it was treated as a primarily positive facet of the political economy.[28] For example, Jonathan Heathcote, Kjetil Storesletten and Giovanni Violante argue that growing income inequality has been a key driver of higher college enrollment and that “households can take great advantage of the opportunities presented by [recent] demand shifts” by getting more education and increasing female participation in the labor market. They concluded that their “finding of welfare gains challenges the conventional view that rising inequality led to large welfare losses.”[29]

Daren Acemoglu, James Robinson and Thierry Verdier also see economic inequality as at least partially beneficial. Inspired by the literature on varieties of capitalism, they present a model in which the “cutthroat” Anglo-Saxon economic institutions generate radical innovation that is then copied in other parts of the world. They argue, in other words, that unequal and dynamic societies “make it possible for more “cuddly” economic institutions to emerge in other parts of the world, for example, in Scandinavia or continental Europe.”[30] In an epigraph they quote Hayek, saying that, “though an egalitarian society could advance [through imitation], its progress would be essentially parasitical, borrowed from those who have paid the cost.”

The single research article that treated wealth inequality as negative outcome, albeit implicitly, also framed it as a clear function of individual choice, concluding that the extent to which people seek out financial knowledge to make more lucrative investment choices “is a key determinant of wealth inequality.” The authors of this article also argue that, “a reform curtailing Social Security benefits would be anticipated to lead to higher financial knowledge,” presumably attenuating wealth discrepancies.[31]

The topic of inequality was also broached in two article-length reviews of Thomas Piketty’s Capital in the Twenty-First Century—the only book reviews that appeared in this coding sample of the JPE.[32] Both reviews were critical and one scathing to an extent that merits some further discussion. The authors, Lawrence Blume and Steven Durlauf, say that in some parts Piketty’s “theoretical discussion does not rise to the level of a scholarly argument”, that he “makes claims about specific cases based on inaccurate and misleading evaluation of the evidence” and that certain of his conclusions are “useful for a pop economics exposition” as “sales are enhanced when an economist claims to reveal the dirty laundry of the profession.”

Some of their complaints are to be expected in a mainstream economics journal. This includes criticism that some of Piketty’s conclusions do not derive from adequate micro-foundations and that he “engages in a sleight of hand” when he uses static definitions to discuss dynamics. Blume and Durlauf are particularly irked by Piketty’s justification of his rejection of the marginal productivity theory of wages on which neoclassical distribution theory is based. This is the idea that wages (or capital returns) are a commensurate to the value that labor (or capital) adds when something is being made or done. Or, to put it even more simply, that what you get is a direct reflection of the value your input has created. Piketty rejects this by arguing that for the highest wages this interpretation fails empirically: we cannot show, for example, that American CEOs, who receive higher wages than CEOs elsewhere, produce much more marginal value than CEOs elsewhere, justifying these discrepencies. Blume and Durlauf, in turn, cite a bevy of research that argues to the contrary and conclude that, “[s]trong claims about the state of knowledge are not appropriate.”[33]On a similar note, they note that “Piketty shies away from the implications of all kinds of heterogeneity for wealth inequality.” The implication here is that the distribution of wealth is a function of a number of attributes, including genetics, luck, work, education, etc. There may, in other words, be sound reasons why some people are well off and other people are not that Piketty does not engage with.

While the formulation is strident, this kind of criticism is not surprising. Other critiques are more unusual in a mainstream economics outlet of this kind. This includes, for example, the complaint that Piketty’s view of capital shares is fundamentally ahistorical, failing to take into account the coevolution of “fertility patterns, political institutions, scientific and medical knowledge, religious beliefs, and ethical values.” Moreover, that Piketty includes only the forms of wealth that he can measure, leaving aside the ways in which, for example, human capital, improvements in nutrition and public institutions and capital contribute to peoples’ welfare.[34] These are valid reactions; they are just not the kind of reactions you would expect in a mainstream economics journal. Ultimately, Blume and Durlauf conclude that Piketty’s does a disservice to the study of inequality.

All in all, then the stance of the JPE was primarily defensive and characterized by paradigm maintenance. While the journal engaged with the topics of finance and, to a much more limited extent, inequality, this also served the purpose of showing that the DSGE-centric paradigm could account for these phenomena. Notably, these exercises in incorporating finance into DSGE do not generate new insights about the role of finance in the crisis. Rather, they are all backwards looking and aim to absorb insights that come from other forms of economic inquiry. For example, early research on the shadow banking sector was primarily qualitative and much of it was carried out by lawyers or economists at the fringes of the academic profession.[35]

Quarterly Journal of Economics

The reaction of the QJE to the intellectual challenge posed by the financial crisis was, by contrast, characterized by some methodological diversification. While most of its published research was still based on DSGE modeling, it also opened up to a range of novel methods. More specifically, for the period coded, the QJE published twelve articles that centered on DSGE models and nine that used other approaches, including narrative analysis, computational linguistics and frequency analysis, survey methods and simple time series. Crucially, since choice of method conditions and constrains content, this also means that the QJE engaged with a number of topics that were outside the methodological scope of the JPE, most notably economic inequality.

As was the case for the JPE, much of the DSGE-based work published in the QJE sought to redress some of the intellectual blind spots revealed by the crisis, primarily regarding the role of finance. Thus, there was work combining business cycles with sovereign default and high-debt ratios and work that took into account the impact of “near money assets.”[36] One article models the shadow banking sector as the direct cause of the financial crisis, showing that private money intermediation in which intermediaries issue too much short-term debt leaves the system highly vulnerable. This article concludes, as do some critics of shadow banking, that there should be reserve requirements for all money-like or near money assets in the system, just as there are for traditional banking.[37]

Taking on the longstanding monetary non-neutrality debate, a methodologically innovative article by Emi Nakamura and Jón Steinsson incorporates high frequency financial data —the abundance of which is not matched by any non-financial data sources—into a model to argue that Federal Reserve announcement do, in fact, have an impact real interest rates, expected inflation and expectations.[38]

On the other hand, there was also scholarship that took the pre-crisis tendency of financial economics to focus on asset prices rather than the potential macroeconomic impact of finance to an extreme by combining macroeconomics and financial economics not to shed light on the macro-economy but rather to examine whether “the possibility of rare disasters, such as economic depressions or wars, is a major determinant of asset risk premia.”[39]

In the way it pushed the limits of pre-crisis DSGE to account for the facts of the crisis and incorporate recently understood financial realities, the QJE was not very different from the JPE. Where it did differ was in publishing articles that used novel methods and were therefore able to generate different kinds of knowledge. For example, two papers used the narrative approach pioneered by Romer and Romer to map out government spending or changes to tax rates.[40] Similarly, Scott Baker, Nicholas Bloom and Steven Davis use a combination of a very broad and systematic analysis of print media and vector auto-regression analysis to develop a new index of economic policy uncertainty and show that it was associated with greater stock price volatility, reduced investment and lowered employment in policy-sensitive sectors like defense, health care, finance, and infrastructure construction.Moreover, using a computational linguistic approach to examine patterns of communication in the Federal Open Market Committee before and after transparency standards were augmented in 1993, Stephen Hansen, Michael McMahon and Andrea Prat show that as transparency was increased members of the committee disagreed less frequently with the chair and junior members in particular spoke out less—though when they did they had greater impact.[41]

The most striking difference between the two journals, however, was on the topic of economic inequality. While the JPE did not feature work that was critical of growing inequality and, to the contrary, published two review articles dismissing Thomas Piketty’s work as methodologically flawed, the QJE was a consistent outlet for the scholarship of Piketty and his co-authors. Between them, Thomas Piketty, Emmanuel Saez and Gabriel Zucman published three articles in the QJE between 2009 and 2018, all of which primarily draw on simple time series analysis. One paper combines income tax returns with macroeconomic household balance sheets to estimate the distribution of wealth in the United States showing that wealth is now nearly ask skewed as it was before the Wall Street crash of 1929. Another uses a combination of tax, survey and national accounts data to show that, when one includes fringe tax benefits, the bifurcation of income between the top and bottom half of the income distribution in recent decades has been more rapid than previous research suggested. Moreover, that income in the top decile was chiefly buoyed by labor earnings in the 1980s but is now primarily a function of returns to capital.[42] The third one shows that while inheritance played a very small role in wealth inequality in France in the postwar decades it has now resumed the significant role it played in the late nineteenth and early twentieth century.

Yet, in spite of the fact that the QJE embraced some methodological diversity and engaged with the literature on inequality, it does not seem that there is an alternative paradigm on the horizon. The New Neoclassical paradigm may have been shaken up but within the discipline, it remains dominant and no coherent competitor is in view. The disciplinary choice to stick with DSGE may have serious implications for academic macroeconomists, however, as it is clear that outside the profession, in public debates, this approach is increasingly being questioned, including in policy settings like central banks.[43]

[1] Gorton & Metrick 2010; Acharya et al. 2013; Adrian & Ashcraft, 2012; Pozsar et al. 2010.

[2] Gabor 2011.

[3]Buiter 2009, my emphasis.

[4] I used IDEA/Repec rankings. The Journal of Economic Literature and the Quarterly Journal of Economics categorize articles by JEL codes so for these journals I looked at all articles that were labeled as category E, which encompases macroeconomics and monetary questions. For the Journal of Political Economy I went through titles and selected articles that seemed to pertain to macroeconomic matters. If that did not prove to be the case when I coded them I discarded them.

[5] For defenses of the pre-crisis status quo see The Great Recession in the shadow of the Great Depression: A review essay on Hall of Mirrors: The Great Depression, the Great Recession, and the Uses and Misuses of History, by Barry Eichengreen; Lee Ohanian and Current federal reserve policy under the lens of economic history: a review essay.

[6] Examples of articles that review scholarship as if nothing had happened include Kenneth West, Hansen and Sargent's Recursive Models of Dynamic Linear Economies: A review essay; Joel Mokyr, Stefano Eusepi, Bruce Peterson, The science of monetary policy: an imperfect knowledge perspective

[7] The Squam Lake report: Commentary (Charles Goodhart); Financial regulation: lessons from the recent financial crises (Takeo Hoshi); Gary Gorton (stress for success); The politics of financial development: A review of Calomiris and Haber's Fragile by Design (Peter Rousseau); The Great Recession in the shadow of the Great Depression: A review essay on Hall of Mirrors: The Great Depression, the Great Recession, and the Uses and Misuses of History, by Barry Eichengreen (Lee Ohanian); Comments on Economic models, economics, and economists: Remarks on Economics Rules by Dani Rodrik; Ariel Rubinstein; Stress for success: a review of Timothy Geithner's financial crisis memoir (Gary Gorton); Getting up to speed on the financial crisis: a one-weekend-reader's guide (Gary Gorton); Reading about the financial crisis: a twenty-one-book review (Andrew Lo).

[8] (Gary Gorton)

[9] (Andrew Lo)

[10] Charles Goodhart

[11] (Gary gorton stress for success)

[12] Facts and challenges from the great recession for forecasting and macroeconomic modeling (Serena Ng; Jonathan Wright)

[13] Liquidity: A new monetarist perspective; Ricardo Lagos; Guillaume Rocheteau; Randall Wright

[14] Complexity and economic policy: a paradigm shift or a change in perspective? A review essay on David Colander and Roland Kupers's Complexity and the Art of Public Policy (Alan Kirman)

[15] Can government purchases stimulate the economy (Valerie Ramey); An empirical analysis of the revival of fiscal activism in the 2000s (John Taylor); On measuring the effects of fiscal policy in recessions (Jonathan Parker);

[16] Jonathan Parker

[17] Comments on Economic models, economics, and economists: Remarks on Economics Rules by Dani Rodrik; Ariel Rubinstein

[18] more specifically four are case studies or comparative case studies, four are review essays, one a regression analysis and one a nonlinear (or threshold) vector auto-regression (TVAR)

[19] Knowledge growth and the allocation of time Robert Lucas; Benjamin Moll;; Equilibrium imitation and growth, Jesse Perla; Christopher Tonetti;; Micro- and macroeconomic implications of heterogeneity in the production of human capital Solomon Polachek; Tirthatanmoy Das; Rewat Thamma-Apiroam; Understanding booms and busts in housing markets, Craig Burnside; Martin Eichenbaum; Sergio Rebelo; The macroeconomic effects of housing wealth, housing finance, and limited risk sharing in general equilibrium Jack Favilukis; Sydney Ludvigson; Stijn Van Nieuwerburgh.

[20] Financial integration, financial development and global imbalances (Enrique Mendoza; Vincenzo Quadrini; Jose Victor Rios-Rull); Trade and capital flows: a financial frictions perspective (Pol Antras; Ricardo Caballero) The pass-through of sovereign risk (Luigi Bocola); Financial integration, financial development and global imbalances (Enrique Mendoza; Vincenzo Quadrini; Jose Victor Rios-Rull);

[21] Investment shocks and asset prices (Dimitris Papanikolaou); Extensive and intensive investment over the business cycle (Boyan Jovanovic; Peter Rousseau)

[22] Investment shocks and asset prices (Dimitris Papanikolaou)

[23] notably Gertler and Kiyotaki 2010.

[24] A model of moral-hazard credit cycles (Roger Myerson)

[25] Endogenous credit cycles (Chao Gu; Fabrizio Mattesini; Cyril Monnet; Randall Wright)

[26] Illiquid banks, financial stability and interest rate policyIlliquid banks, financial stability and interest rate policy (Douglas Diamond; Raghuram Rajan)

[27] Credit shocks and aggregate fluctuations in an economy with production heterogeneity (Aubhik Khan; Julia Thomas); Optimal time-consistent macroprudential policy (Javier Bianchi; Enrique Mendoza)

[28] See also Jack Favilukis; Syndey Ludvigson; Stijn Van Nieuwerburgh. “The macroeconomic effects of housing wealth, housing finance and limited risk sharing in general equilibrium”

[29] The macroeconomic implications of rising wage inequality in the United States (Jonathan Heathcote; Kjetil Storesletten; Giovanni Violante)

[30] Asymmetric growth and institutions in an interdependent world Daren Acemoglu; James Robinson; Thierry Verdier

[31] Optimal financial knowledge and wealth inequality (Annamarie Lusardi; Pierre-Carl Michaud; Olivia Mitchell)

[32] Capital in the twenty-first century: a review essay (Lawrence Blume; Steven Durlauf); Is Piketty’s “second law of capitalism” fundamental? (Per Krusell; Anthony Smith)

[33] “Prominent examples include Kaplan and Rauh (2010), which elaborates evidence on a wage/productivity link for managers, and Frydman and Saks (2010), which argues that executive compensation has been linked to firm performance for most decades of the twentieth century and more tightly so since 1980. This role of productivity in high salaries is hardly resolved; contrast Bertrand (2009) and Kaplan and Rauh (2013).”

[34] They also pose this strange question: “One wonders whether inequality in the private ownership of Picasso’s paintings matters much for Manhattanites who have access to the Museum of Modern Art, the Guggenheim, and the Whitney.” I would think that it would matter, assuming that Manhattanites care not just about their viewing pleasure but also about their personal wealth.

[35] Ban, Seabrooke and Freitas 2016.

[36] A general equilibrium model of sovereign default and business cycles (Enrique Mendoza; Vivian Yue); The liquidity premium of near-money assets (Stefan Nagel)

[37] Monetary policy as financial stability regulation (Jeremy Stein)

[38] High-Frequency Identification of Monetary Non-Neutrality: the Information Effect (Emi Nakamura; Jón Steinsson)

[39] Variable rare disasters: An exactly solved framework for ten puzzles in macro-finance (Xavier Gabaix)

[40] Karel Mertens; José Luis Montiel Olea; Identifying government spending shocks: It's all in the timing, Valerie Ramey.

[41] Transparency and deliberation within the FOMC: a computational linguistics approach.

[42] Wealth inequality in the United States since 1913: Evidence from capitalized income tax data (Emmanuel Saez; Gabriel Zucman); Distributional national accounts: methods and estimates for the United States (Thomask Piketty; Emmanuel Saez; Gabriel Zucman); On the long-run evolution of inheritane: France 1820-2050 (Thomas Piketty)

[43] Hope and Soskice 2016