Robert Solow has criticized our 2006 Journal of Economic Perspectives essay describing “Modern Macroeconomics in Practice.” Solow eloquently voices the commonly heard complaint that too much macroeconomic work today starts with a model with a single type of agent. We argue that modern macroeconomics may not end too far from where Solow prefers. He is also critical of how modern macroeconomists use data to construct models. Specifically, he seems to think that calibration is the only way that our models encounter data. To the contrary, we argue that modern macroeconomics uses a wide variety of empirical methods and that this big-tent approach has served macroeconomics well. Solow also questions our claim that modern macroeconomics is firmly grounded in economic theory. We disagree and explain why.
- E32 - Business Fluctuations; Cycles
- E21 - Macroeconomics: Consumption; Saving; Wealth
- E20 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data)
- E13 - General Aggregative Models: Neoclassical
- E50 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
- E40 - Money and Interest Rates: General
- E22 - Investment; Capital; Intangible Capital; Capacity
- E12 - General Aggregative Models: Keynes; Keynesian; Post-Keynesian
- E52 - Monetary Policy
- Federal Reserve Bank of Minneapolis. Research Department
- Federal Reserve Bank of Minneapolis
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