What kind of microfoundations? Notes on the evolutionary approach

The microfoundations of economic models are a hotly debated topic in the literature. The debate is important because microfoundations —the ways in which agents decide and behave— have implications that go beyond a specific firm, market or activity; they strongly condition macroeconomic outcomes. This document addresses the classical problems of rationality, uncertainty and institutions: when there is Keynes-Knight uncertainty and rationality is bounded, decision making adopts the form of conventional rules or heuristics. The hyper-rational representative agent of the rational expectations world could generate highly misleading outcomes in macro models. Section 2 applies this discussion to the study of technical change and to innovation and diffusion of technology in the international system, which transform the patterns of specialization. Section 3 discusses the forces that may trap a country in a low-growth trap and the crucial role of institutions in escaping from this trap.

Youth expectations and rural development

Includes bibliography

Major macroeconomic disturbances, expectations and policy responses

Includes bibliography

The relation between foreign exchange and banking crises in emerging countries: information and expectations problems

Includes bibliography

Expectations and industrial output in Uruguay: Sectoral interdependence and common trends

This paper examines the interdependence between expectations and growth by analysing Uruguayan manufacturing industry, divided for the purpose into four industry groupings differentiated by trade participation and production specialization. The study shows that there is a long-run relationship between industrialists' expectations and output growth in each grouping. In the most trade-oriented groupings the relationship is one of predetermination, showing how useful expectations are as a guide to sectoral growth. Expectations in the four industrial groupings are shown to follow a common long-run trend, identified with the one guiding the export grouping. Impulse-response simulations derived from a multisectoral vector autoregression (VAR) model confirm the important role of the industries most exposed to international competition in spreading shorter-term shocks.