In this interview, Prof. Farmer explains to us: Why are multiple equilibria modeling better compared to the standard unique equilibrium model? Why should "belief" be an important component to macroeconomic modeling? Why should central banks consider stock market intervention in stabilizing the employment markets?
Following our discussion on post-2008 Macroeconomics developments and the importance of DSGE models in part I of the interview, we asked Prof. Christiano about one of his recent and important research paper "Understanding the Great Recession". What does his model tell us about the Great Recession? Does labor participation rate have a role in the developments of the Great Recession? These are the questions we've discussed with Prof. Christiano, and he has some great answers.