New Consensus Macroeconomics: A Critical Appraisal
Levy Economics Institute, Working Paper No. 564
26 Pages Posted: 27 May 2009
Date Written: May 22, 2009
This paper is concerned with the New Consensus Macroeconomics (NCM) in the case of an open economy. It outlines and explains briefly the main elements of and way of thinking about the macroeconomy from the standpoint of both its theoretical and its policy dimensions. There are a few problems with this particular theoretical framework. We focus here on two important aspects closely related to NCM: the absence of banks and monetary aggregates from this theoretical framework, and the way the notion of the “equilibrium real rate of interest” is utilized by the same framework. The analysis is critical of NCM from a Keynesian perspective.
Keywords: New Consensus Macroeconomics, Monetary Policy, Banks, Monetary Aggregates, Equilibrium Real Rate of Interest
JEL Classification: E10, E12
Suggested Citation: Suggested Citation