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Prof. Roger Farmer - University of Warwick. Coventry, , GB

Prof. Roger Farmer Prof. Roger Farmer

Professor | University of Warwick


Roger Farmer studies the connection between market psychology and macroeconomics.



Prof. Roger Farmer Publication Prof. Roger Farmer Publication Prof. Roger Farmer Publication Prof. Roger Farmer Publication




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Areas of Expertise (5)

Market Economy

Self-fulfilling Prophecies



Market Psychology

Accomplishments (1)

Maurice Allais Prize in Economic Science

Co-Winner of the 2013 Maurice Allais Prize in Economic Science

Education (3)

University of Western Ontario: Ph.D., Economics

Manchester University: M.A., Econometrics

Manchester University: B.A., Economics

Selected Media Appearances (1)

The stock market is on fire. Are we about to get burned?

The Outline  online


As it stands, few economists can be found warning that the stock market is a likely recession trigger. For example, New York Times columnist Paul Krugman makes the typical Keynesian case here that inadequate demand causes recessions. Of course, mainstream economists are famously inept at predicting downturns, and orthodox economic models simply could not grasp the realities of the last crash. And there is one mainstream economist of high standing, Roger Farmer, who insists that the stock market causes recessions. But in general, it’s not the most likely culprit....

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Selected Event Appearances (3)

Keynote Speaker

Ninth Conference on Growth and Business Cycles in Theory and Practice  Manchester University


Invited Speaker

2nd Research Conference of the CEPR Network on Macroeconomic Modelling and Model Comparison  Stanford University


Keynote Speaker

Society for Economic Measurement, Annual Conference,  MIT - Cambridge, MA


Selected Articles (6)

The Indeterminacy School in Macroeconomics

The National Bureau of Economics

2019 The Indeterminacy School in Macroeconomics exploits the fact that macroeconomic models often display multiple equilibria to understand real-world phenomena. There are two distinct phases in the evolution of its history. The first phase began as a research agenda at the University of Pennsylvania in the U.S. and at CEPREMAP in Paris in the early 1980s. This phase used models of dynamic indeterminacy to explain how shocks to beliefs can temporarily influence economic outcomes. The second phase was developed at the University of California Los Angeles in the 2000s. This phase uses models of incomplete factor markets to explain how shocks to beliefs can permanently influence economic outcomes. The first phase of the Indeterminacy School has been used to explain volatility in financial markets. The second phase of the Indeterminacy School has been used to explain periods of high persistent unemployment. The two phases of the Indeterminacy School provide a microeconomic foundation to Keynes’ General Theory that does not rely on the assumption that prices and wages are sticky.

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Animal spirits in a monetary model

European Economic Review

2019 We integrate Keynesian economics with general equilibrium theory in a new way. We develop a simple graphical apparatus, the IS-LM-NAC framework, that can be used by policy makers to understand how policy affects the economy. A new element, the No-Arbitrage-Condition (NAC) curve, connects the interest rate to current and expected future values of the stock market and it explains how ‘animal spirits’ influence economic activity. Our framework provides a rich new approach to policy analysis that explains the short-run and long-run effects of policy.

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Some International Evidence for Keynesian Economics without the Phillips Curve

National Bureau of Economics

2019 Farmer and Nicolò (2018) show that the Farmer Monetary (FM)- model outperforms the three-equation New-Keynesian (NK)-model in post war U.S. data. In this paper, we compare the marginal data density of the FM-model with marginal data densities for determinate and indeterminate versions of the NK-model for three separate samples using U.S., U.K. and Canadian data. We estimate versions of both models that restrict the parameters of the private sector equations to be the same for all three countries. Our preferred specification is the constrained version of the FM-model which has a marginal data density that is more than 40 log points higher than the NK alternative. Our findings also demonstrate that cross-country macroeconomic differences are well explained by the different shocks that hit each economy and by differences in the ways in which national central banks reacted to those shocks.

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Keynesian economics without the Phillips curve

Journal of Economic Dynamics and Control

2018 We extend Farmer’s 2012b Monetary (FM) model in three ways. First, we derive an analog of the Taylor Principle and we show that it fails in U.S. data. Second, we use the fact that the model displays dynamic indeterminacy to explain the real effects of nominal shocks. Third, we use the fact the model displays steady-state indeterminacy to explain the persistence of unemployment. We show that the FM model outperforms the New-Keynesian model and we argue that its superior performance arises from the fact that the reduced form of the FM model is a VECM as opposed to a VAR.

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The Role of Financial Policy

National Bureau of Economics

2018 I review the contribution and influence of Milton Friedman’s 1968 presidential address to the American Economic Association. I argue that Friedman’s influence on the practice of central banking was profound and that his argument in favour of monetary rules was responsible for thirty years of low and stable inflation in the period from 1979 through 2009. I present a critique of Friedman’s position that market-economies are self-stabilizing, and I describe an alternative reconciliation of Keynesian economics with Walrasian general equilibrium theory from that which is widely accepted today by most neo-classical economists.

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Pricing assets in a perpetual youth model

Review of Economic Dynamics

2018 This paper constructs a general equilibrium model where asset price fluctuations are caused by random shocks to beliefs about the future price level that reallocate consumption across generations. In this model, asset prices are volatile, and price–earnings ratios are persistent, even though there is no fundamental uncertainty and financial markets are sequentially complete. I show that the model can explain a substantial risk premium while generating smooth time series for consumption. In my model, asset price fluctuations are Pareto inefficient and there is a role for treasury or central bank intervention to stabilize asset price volatility.

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