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Modern Macroeconomics in Practice: How Theory is Shaping Policy

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Author Info
Patrick Kehoe
Varadarajan V. Chari

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Abstract

Theoretical advances in macroeconomics made in the last three decades have had a major influence on macroeconomic policy analysis. Moreover, over the last several decades, the United States and other countries have undertaken a variety of policy changes that are precisely what macroeconomic theory of the last 30 years suggests. The three key developments that have shaped macroeconomic policy analysis are the Lucas critique of policy evaluation due to Robert Lucas, the time inconsistency critique of discre-tionary policy due to Finn Kydland and Edward Prescott, and the development of quantitative dynamic stochastic general equilibrium models following Finn Kydland and Edward Prescott.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12476.

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Date of creation: Aug 2006
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Handle: RePEc:nbr:nberwo:12476

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Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
H2 - Public Economics - - Taxation, Subsidies, and Revenue
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. David Colander, 2009. "“What is so Austrian about Austrian Economics?”," Middlebury College Working Paper Series 0910, Middlebury College, Department of Economics. [Downloadable!]
  2. David Colander, 2009. "Economists, Incentives, Judgment, and the European CVAR Approach to Macroeconometrics," Middlebury College Working Paper Series 0912, Middlebury College, Department of Economics. [Downloadable!]
  3. Colin Rogers, 2008. "Keynes, Keynesians and contemporary monetary theory and policy: an assessment," Working Papers 2008-05, University of Adelaide, School of Economics. [Downloadable!]
  4. Ioannis Karatzas & Martin Shubik & William D. Sudderth, 2008. "Financial Control of a Competitive Economy without Randomness," Cowles Foundation Discussion Papers 1681, Cowles Foundation, Yale University. [Downloadable!]
  5. Felicity C Barker & Robert A Buckle & Robert W St Clair, 2008. "Roles of Fiscal Policy in New Zealand," Treasury Working Paper Series 08/02, New Zealand Treasury. [Downloadable!]
  6. Colander, David C., 2009. "Economists, incentives, judgment, and the European CVAR approach to macroeconometrics," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(9), pages 1-21. [Downloadable!]
  7. Brian Snowdon, 2007. "The New Classical Counter-Revolution: False Path or Illuminating Complement?," Eastern Economic Journal, Eastern Economic Association, vol. 33(4), pages 541-562, Fall. [Downloadable!]
  8. David Colander, 2009. "How Did Macro Theory Get So Far off Track, and what Can Heterodox Macroeconomists Do to Get it Back On Track?," Middlebury College Working Paper Series 0911, Middlebury College, Department of Economics. [Downloadable!]
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