Propagation Problems

There is no doubt in my mind that the most important paper in Ragnar Frisch's impressive bibliography is his paper on “dynamic economics” in the Cassel Festschrift (Frisch, 1933). I cannot imagine a course of lectures in macroeconomics that would omit significant consideration of that paper. For me it is simply a favorite, and for many it is his most celebrated work.

There are problems with that paper, at the levels of specification and empirical measurement, but the conceptual contribution was overwhelming - to look at the dynamics of the macroeconomy in terms of an internal mechanism related to economic response characteristics and an external mechanism related to random shocks. In later treatments of this subject we have come to rely more heavily on nonrandom exogenous impulses, to a large extent caused by economic policy, but they can easily be incorporated into Frisch's framework.