Knowledge, Information, and Expectations in Modern Macroeconomics

Philippe Aghion is Professor of Economics at Harvard University and at University College London. Roman Frydman is Professor of Economics at New York University. Joseph Stiglitz, Professor of Economics at Columbia University, was awarded the Nobel Prize in Economic Science in 2001. Michael Woodford is the Harold H. Helm '20 Professor of Economics and Banking at Princeton University.

"This is a terrific book, about as good as volumes of collected papers will ever get. It will attract considerable interest, because it brings together so many of our most illustrious people in macroeconomics to reconsider the concepts of one of our most influential theorists, Ned Phelps."—Robert J. Shiller, Yale University, author of Irrational Exuberance

• Contributors ix Edmund Phelps, Insider-Economists' Insider, Paul A. Samuelson 1 Edmund S. Phelps and Modern Macroeconomics, Philippe Aghion, Roman Frydman, Joseph Stiglitz, and Michael Woodford 3 PART I Information, Wage-Price Dynamics, and Business Fluctuations 1 Imperfect Common Knowledge and the Effects of Monetary Policy, Michael Woodford 25 2 Comments on Woodford, Lars E. O. Svensson 59 3 Sticky Information: A Model of Monetary Nonneutrality and Structural Slumps, N. Gregory Mankiw and Ricardo Reis 64 4 A Theory of Rational Inflationary Inertia, Guillermo A. Calvo, Oya Celasun, and Michael Kumhof 87 5 Comments on Calvo, Celasun, and Kumhof, Mark Gertler 118 6 Macroeconomic Fluctuations in an Economy of Phelps-Winter Markets, Bruce Greenwald and Joseph Stiglitz 123 7 General Comments on Part I, Robert E. Lucas, Jr. 137 PART II Imperfect Knowledge, Expectations, and Rationality 8 Imperfect Knowledge Expectations, Uncertainty-Adjusted Uncovered Interest Rate Parity, and Exchange Rate Dynamics, Roman Frydman and Michael D. Goldberg 145 9 Comments on Frydman and Goldberg, David H. Papell 183 10 Endogenous Fluctuations and the Role of Monetary Policy, Mordecai Kurz with Hehui Jin and Maurizio Motolese 188 11 A Debt Puzzle, David Laibson, Andrea Repetto, and Jeremy Tobacman 228 12 Comments on Laibson, Repetto, and Tobacman, Robert A. Pollak 267 13 Reflections on Parts I and II, Edmund S. Phelps 271 PART III Determinants of Equilibrium Unemployment 14 How Monopsonistic Is the (Danish) Labor Market? Dale T. Mortensen 285 15 Company Start-Up Costs and Employment, Christopher A. Pissarides 309 16 European Unemployment: From a Worker's Perspective, Lars Ljungqvist and Thomas J. Sargent 326 17 Comments on Ljungqvist and Sargent, Olivier J. Blanchard 351 18 Flexibility and Job Creation: Lessons for Germany, James J. Heckman 357 19 The Beveridge Curve, Unemployment, and Wages in the OECD from the 1960s to the 1990s, Stephen Nickell, Luca Nunziata, Wolfgang Ochel, and Glenda Quintini 394 20 Comments on Nickell, Nunziata, Ochel, and Quintini, Jean-Paul Fitoussi 432 PART IV Education, Technical Change, and Growth 21 Wage Inequality and Technological Change: A Nelson-Phelps Approach, Philippe Aghion, Peter Howitt, and Gianluca Violante 443 22 Comments on Aghion, Howitt, and Violante, Robert E. Hall 462 23 Factor Prices and Technical Change: From Induced Innovations to Recent Debates, Daron Acemoglu 464 24 Comments on Acemoglu, Nancy L. Stokey 492 25 Population and Ideas: A Theory of Endogenous Growth, Charles I. Jones 498 26 Another View of Investment: 40 Years Later, Jess Benhabib and Bart Hobijn 522 27 General Comments on Part IV, Robert M. Solow 546 28 Reflections on Parts III and IV, Edmund S. Phelps 550 Index 565