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Is something really wrong with macroeconomics?

Author

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  • Ricardo Reis

Abstract

Many critiques of the state of macroeconomics are off target. Current macroeconomic research is not mindless DSGE modelling filled with ridiculous assumptions and oblivious of data. Rather, young macroeconomists are doing vibrant, varied, and exciting work, getting jobs, and being published. Macroeconomics informs economic policy only moderately, and not more than nor differently from other fields in economics. Monetary policy has benefitted significantly from this advice in keeping inflation under control and preventing a new Great Depression. Macroeconomic forecasts perform poorly in absolute terms and, given the size of the challenge, probably always will. But relative to the level of aggregation, the time horizon, and the amount of funding, macroeconomic forecasts are not so obviously worse than those in other fields. What is most wrong with macroeconomics today is perhaps that there is too little discussion of which models to teach and too little investment in graduate-level textbooks.

Suggested Citation

  • Ricardo Reis, 2018. "Is something really wrong with macroeconomics?," Oxford Review of Economic Policy, Oxford University Press, vol. 34(1-2), pages 132-155.
  • Handle: RePEc:oup:oxford:v:34:y:2018:i:1-2:p:132-155.
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    File URL: http://hdl.handle.net/10.1093/oxrep/grx053
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    References listed on IDEAS

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    1. Reis, Ricardo, 2016. "Funding quantitative easing to target inflation," LSE Research Online Documents on Economics 67883, London School of Economics and Political Science, LSE Library.
    2. Joshua D. Angrist & Jörn-Steffen Pischke, 2017. "Undergraduate Econometrics Instruction: Through Our Classes, Darkly," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 125-144, Spring.
    3. Ricardo Reis, 2009. "Interpreting the Unconventional U.S. Monetary Policy of 2007-09," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(2 (Fall)), pages 119-182.
    4. Jens Hilscher & Alon Raviv & Ricardo Reis, 2014. "Inflating Away the Public Debt? An Empirical Assessment," NBER Working Papers 20339, National Bureau of Economic Research, Inc.
    5. repec:spr:fimops:978-3-319-45710-9 is not listed on IDEAS
    6. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, November.
    7. Olivier Blanchard, 2016. "Do DSGE Models Have a Future?," Policy Briefs PB16-11, Peterson Institute for International Economics.
    8. G. Elliott & C. Granger & A. Timmermann (ed.), 2013. "Handbook of Economic Forecasting," Handbook of Economic Forecasting, Elsevier, edition 1, volume 2, number 2.
    9. Oh, Hyunseung & Reis, Ricardo, 2012. "Targeted transfers and the fiscal response to the great recession," Journal of Monetary Economics, Elsevier, vol. 59(S), pages 50-64.
    10. Clements, Michael P. & Hendry, David F. (ed.), 2011. "The Oxford Handbook of Economic Forecasting," OUP Catalogue, Oxford University Press, number 9780195398649.
    11. David Card & Giovanni Peri, 2016. "Immigration Economics by George J. Borjas: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1333-1349, December.
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    Cited by:

    1. Eugenio Caverzasi & Alberto Russo, 2018. "Toward a new microfounded macroeconomics in the wake of the crisis," Working Papers PKWP1807, Post Keynesian Economics Society (PKES).
    2. repec:bis:bisbps:95 is not listed on IDEAS
    3. repec:jpe:journl:1475 is not listed on IDEAS
    4. Sergey Ivashchenko & Semih Emre Çekin & Kevin Kotzé & Rangan Gupta, 2018. "Forecasting with Second-Order Approximations and Markov Switching DSGE Models," Working Papers 201862, University of Pretoria, Department of Economics.
    5. Gulan, Adam, 2018. "Paradise lost? A brief history of DSGE macroeconomics," Research Discussion Papers 22/2018, Bank of Finland.
    6. repec:taf:jecmet:v:25:y:2018:i:3:p:252-264 is not listed on IDEAS

    More about this item

    Keywords

    methodology; graduate teaching; forecasting; public debate;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General

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