Working Paper: NBER ID: w2474
Authors: N. Gregory Mankiw
Abstract: This paper outlines the major developments in macroeconomics over the past two decades. It examines the reasons for the breakdown in the consensus view of the 1960s and how this breakdown has guided research in macroeconomics. The introduction and importance of "rational expectations" are discussed, as are recent advances within the new classical and new Keynesian paradigms.
Keywords: macroeconomics; rational expectations; economic fluctuations; monetary policy
JEL Codes: E30; E40; E50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| breakdown of the consensus view in macroeconomics (E65) | reevaluation of macroeconomic models (E19) |
| empirical failures of IS-LM model and Phillips curve (E12) | breakdown of the consensus view in macroeconomics (E65) |
| theoretical shortcomings (C50) | breakdown of the consensus view in macroeconomics (E65) |
| rising inflation does not correlate with lower unemployment (E31) | breakdown of the consensus view in macroeconomics (E65) |
| introduction of rational expectations (D84) | alteration of implications of monetary policy (E52) |
| systematic monetary policy influences expected inflation (E52) | systematic monetary policy does not influence actual unemployment (E49) |
| rules in monetary policy yield better outcomes (E61) | fixed rules outperform discretionary policies (E61) |