Working Paper: NBER ID: w3256
Authors: N. Gregory Mankiw
Abstract: This paper presents a non-technical discussion of some of the important developments in macroeconomics over the past twenty years. It considers three broad categories of research. First, it discusses how the notion of rational expectations has affected economists' views on the role of economic policy, the debate over rules versus discretion, and empirical work in macroeconomics Second, it discusses various new classical approaches to the business cycle, including imperfect information theories, real business cycle theories, and sectoral shift theories. Third, it discusses various new Keynesian approaches to the business cycle, includes theories based on general disequilibrium, labor contracting, and menu costs.
Keywords: macroeconomics; rational expectations; business cycles
JEL Codes: E30; E32; E52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| breakdown of macroeconomic consensus in the 1970s (E65) | reassessment of macroeconomic theories (E65) |
| failure of the consensus model (D70) | reassessment of macroeconomic theories (E65) |
| failure of the Phillips curve (E31) | inadequacy of theoretical framework (C90) |
| Robert Lucas's critique (E19) | undermining of the macroeconomic consensus (E65) |
| economic policy (E60) | output fluctuations (E39) |
| economic policy (E60) | employment fluctuations (J63) |
| rational expectations (D84) | implications for economic policy (F68) |