From dynamics to stabilisation: Albert Ando and Franco Modigliani’s contributions to the theory of economic growth and fluctuations (1959–1970)1

Abstract

Since the late 1950s Albert Ando and Franco Modigliani were engaged with the study of economic growth and fluctuations with the aim of providing microfoundations to a model capable of analysing growth and fluctuations jointly. It is argued that this research line continued through the 1960s and early 1970s with the construction of the Federal Reserve Board, MIT and University of Pennsylvania macroeconometric model. However, while in Ando and Modigliani’s earlier model dynamics and stability were conceived in terms of movements around a steady state equilibrium, with econometric models devoted to policy simulations and forecasting, the system’s stability or instability was identified with the time length of the adjustment process.