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Title:Overdeterminacy and endogenous cycles : Trygve Haavelmo's business cycle model and its implications for monetary policy PDF Logo
Authors:Anundsen, André K.
Krogh, Tord S. H.
Nymoen, Ragnar
Vislie, Jon
Issue Date:2011
Series/Report no.:Memorandum // Department of Economics, University of Oslo 2011,03
Abstract:This paper presents the business cycle model that Trygve Haavelmo developed as part of his research program in macroeconomic and monetary theory. Driven by a mismatch between the marginal return to capital and the rate of return required by capital owners, this model generates endogenous cycles. The theory leads to a distinct analysis of the scope and limitations of monetary policy. A main message of the model is that care should be taken when conducting 'autonomous' monetary policy and that special emphasis should be put on the soundness of nancial markets. Adopting a strict nominal anchor as the main objective of monetary policy might generate imbalances in the capital market.
Subjects:investments
business cycles
monetary policy
JEL:E22
E32
E44
E52
Document Type:Working Paper
Appears in Collections:Memorandum, Department of Economics, University of Oslo

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