New dynamic disequilibrium

Abstract

The series of financial crises shook seriously the new consensus between neoclassical and new Keynesians on dynamic stochastic general equilibrium (DSGE) models. The criticisms were directed mainly to inadequate policy of monetary institutions and the inability of these models to foresee similar crises. In the ensuing debate on the future of macroeconomic theory two approaches were outlined: (1) Combination of alternative economic theories in new, free framework that ignores DSGE models; and (2) Critical analysis of the shortcomings of the DSGE models that enrich them with new ideas and methodological instruments. This article belongs to the second approach and presents DSGE models through the lens of new, non-Walrasian's version of the dynamic disequilibrium. Unlike neo-Walrasian disequilibrium, not the natural equilibrium prices of Smith and Marshall, but the natural rate of Wicksell are put in the role of a gravity center. Endogenezation of capital allows the model to involve the problem of intertemporal coordination, which is pathological for the economy and leads to financial crises.