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The purpose of this study is to investigate why “financial fragility” carries different definitions in the economic literature. This is a useful task as the detection of “financial fragility” depends, in part, upon how one defines it. According to Post Keynesian economists, financial fragility is a process that can culminate in financial instability (an event). For mainstream or New Keynesian economists, financial fragility has been traditionally defined as a state in which a shock can trigger instability. More recently, however, mainstream economists have recast their definition as a particular form of financial instability – an event. Each definition of financial fragility is intimately linked to the theoretical foundation upon which it rests. This carries important implications for the ability of policymakers to assess and manage the health of an economy.

The different approaches to the definition and detection of financial fragility are compared using corresponding sets of indicators. Indicators for the Post Keynesian approach are derived from a simple cash‐flow accounting framework, in the spirit of Hyman Minsky. The economy selected for study is New Zealand.

According to the Post Keynesian approach, New Zealand has been in a financially fragile state for over three years, a period during which policymakers could have been creating ways to make New Zealand more resilient to the onset of instability. According to the New Keynesian approach, New Zealand may just now be experiencing fragility, giving policymakers much less time to react.

This study traces the definitions of financial fragility to their underlying theoretical frameworks and draws the implications for the methods of detecting financial fragility.

The primary purpose of this paper is to investigate the sources of the business cycle fluctuations in Vietnam. To this end, the author develops a small open economy New Keynesian dynamic stochastic general equilibrium (SOE-NK-DSGE) model. Accordingly, this model includes various features, such as habit consumption, staggered price, price indexation, incomplete exchange-rate pass-through (ERPT), the failures of the law of one price (LOOP) and the uncovered interest rate parity. It is then estimated by using the Bayesian technique and Vietnamese data 1999Q1–2017Q1. Based on the estimated model, this paper analyzes the sources of the business cycle fluctuations in this emerging economy. Indeed, this research paper is the first attempt at developing and estimating the SOE-NK-DSGE model with the Bayesian technique for Vietnam.

A SOE-NK-DSGE model—Bayesian estimation.

This paper analyzes the sources of the business cycle fluctuations in Vietnam.

This research paper is the first attempt at developing and estimating the SOE-NK-DSGE model with the Bayesian technique for Vietnam.

This chapter analyzes the empirical relationship between the pricesetting/consumption behavior and the sources of persistence in inflation and output. First, a small-scale New-Keynesian model (NKM) is examined using the method of moment and maximum likelihood estimators with US data from 1960 to 2007. Then a formal test is used to compare the fit of two competing specifications in the New-Keynesian Phillips Curve (NKPC) and the IS equation, that is, backward- and forward-looking behavior. Accordingly, the inclusion of a lagged term in the NKPC and the IS equation improves the fit of the model while offsetting the influence of inherited and extrinsic persistence; it is shown that intrinsic persistence plays a major role in approximating inflation and output dynamics for the Great Inflation period. However, the null hypothesis cannot be rejected at the 5% level for the Great Moderation period, that is, the NKM with purely forward-looking behavior and its hybrid variant are equivalent. Monte Carlo experiments investigate the validity of chosen moment conditions and the finite sample properties of the chosen estimation methods. Finally, the empirical performance of the formal test is discussed along the lines of the Akaike's and the Bayesian information criterion.

We test the determinacy properties of the standard and financial-sector-augmented Taylor rules in a new Keynesian model with a presence of banking activities. We extend the basic fully rational environment to the setting with heterogeneous expectations. We observe that the benefits from extra financial targeting are limited. Financial targeting, if well designed, can compensate for the improper output-gap targeting through the financial-production channel. The analysis demonstrates however possible threats resulting from the misspecification of the augmented rule. A determinate mix of output-gap and inflation weights can turn indeterminate if compensated by too extreme financial targeting. The results are robust to the presence of heterogeneous expectations.

Using recent literature, examines developments in seven macroeconomic schools of thought: orthodox Keynesian, monetarist, new classical, real business cycle theory, new Keynesian, Austrian and post‐Keynesian. Describes all of these and classifies them as orthodox, new or radical. After setting out the differences, discusses the degree of agreement between the schools of thought. Concludes that macroeconomics is constantly evolving, resulting in new disagreements requiring a new consensus.

F. A. Hayek’s macroeconomic theory and policy ideas have gained renewed attention since the cheap-money boom until 2007, and subsequent bust, followed the basic Hayekian narrative. Only to a very limited extent, however, do we find Hayek’s ideas on the agenda of mainstream macroeconomic researchers since Robert Lucas’s research program gave way to “Neoclassical” and “New Keynesian” DSGE models. We find examples of deeper interest on the periphery of the mainstream. Hayek’s influence on today’s macroeconomic policy discussions remains similarly limited, although he has become an icon to some opponents of loose monetary policy.