Graduate Macroeconomic Theory Class

Graduate Macroeconomic Theory Class
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Graduate Macroeconomic Theory Class
Ricardo Caballero’s “Macroeconomics After the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome” portrays how the recent money crisis damaged macroeconomics reputation. One of the primary objectives of the article is to depict how the financial system has become fragile due to high levels of mismatches and leverages between long-term assets and short-term liabilities (Caballero, 2010). Although these issues justify the importance of implementing relevant policies, it is difficult to predict a severe crisis. Another aim of Caballero’s reading is to make it clear that policy adjustment is not the most appropriate strategy to eliminate future financial crises since they make the economy exposed to unexpected and new challenges.
The other main objective of the article was to show key issues that caused the recent money crisis and which might affect the economy adversely if they remain unaddressed. They include crises, panics, collateral shortages, liquidity evaporation, and risk-shifting (Caballero, 2010). One of the most significant ta...