Introduction to the symposium on bubbles, multiple equilibria, and economic activities

摘要

The recent financial crisis has damaged the reputation of macroeconomics and prompted researchers to rethink the core of modern macroeconomics. The current core is the dynamic stochastic general equilibrium (DSGE) approach. This approach is based on the assumptions of rational expectations, intertemporal optimization, and market clearing and hence is coherent. Moreover, DSGE models can be calibrated and estimated to provide quantitative predictions and may be useful for policy analysis. However, these models fail to explain many puzzling phenomena in finance and macroeconomics. Besides the celebrated equity premium puzzle, there are many questions we still do not know much. For example, what are the sources of business cycles? Why are stock markets so volatile? Does the stock market comove with the real economy and how can one explain their relationship? What is the role of banks and credit markets and how do they impact the real economy?