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Hans-Michael Trautwein

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Hans-Michael Trautwein

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Hans-Michael Trautwein

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Hans-Michael Trautwein

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Hans-Michael Trautwein

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Hans-Michael Trautwein

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Hans-Michael Trautwein

Keynes and Ohlin encountered each other in two famous controversies in the Economic Journal, both under the editorship of Keynes. The first, which took place in 1929, was the debate about the transfer problem in German reparation payments. The second was an exchange in 1937 about anticipations and critique of Keynes’s General Theory by a group of Swedish economists whom Ohlin described as “the Stockholm School”. Both debates ended inconclusively, but came to stimulate further developments in development economics and macroeconomics. A closer look at the relevant articles helps to define the common ground in the two controversies. It corroborates Ohlin’s claim that there was a “parallel development of several essential aspects of theory and policy in Cambridge and Stockholm” during those years of high theory.

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Hans-Michael Trautwein

In 1968, Axel Leijonhufvud published a treatise On Keynesian Economics and the Economics of Keynes that offered an interpretation of the latter quite different from standard Keynesian thinking at the time. The theme that Leijonhufvud extracted from Keynes’s Treatise on Money (1930) and General Theory of Employment, Interest and Money (1936) is the incompleteness of information and resulting failures in the intertemporal coordination of activities in large, complex economic systems. He has made this the principal theme of his further work, his collections of essays bearing such titles as Information and Coordination (1981) and Macroeconomic Instability and Coordination (2000). Leijonhufvud criticizes Keynesian economics for its reduction of Keynes’s ideas to a neo-Walrasian “frictions” view of deviations from optimal general equilibrium. In recent writings he has extended that critique to dynamic stochastic general equilibrium (DSGE)-based New Keynesian economics.

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Hans-Michael Trautwein

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Hans-Michael Trautwein and Abdallah Zouache

This paper evaluates the concepts of natural rates of interest and output in Woodford’s »neo-Wicksellian« and »benchmark New Keynesian« version of the New Neoclassical Synthesis (NNS) by comparing them with the original approach of Wicksell and critical assessments and adaptations by Lindahl, Myrdal, Keynes and Friedman. It is shown that the theoretical foundations of the NNS prescriptions for monetary policy are ambiguous and incomplete. Using the NNS definition(s) of the natural rate of output, New Keynesian policy rules do not necessarily yield results superior to those of »Old Keynesian« strategies of output stabilization. Moreover, natural rates of interest can hardly be defined independently of the influences of monetary policy. The use of natural-rate concepts in the NNS disregards essential problems that were identified in the older Wicksellian and Keynesian literature.