In a new paper, Nobel prize-winning economist Joseph Stiglitz attacks standard theories of economic fluctuations and argues in favour of alternative models.

The working paper, originally presented as part of a collection of essays in honour of the economist Giovanni Dosi, argues that theories fail when they assume economies will always return to a long-run trend, despite short-term shocks. Major macroeconomic models, such as dynamic stochastic general equilibrium models, assume such a process.

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