The Resurgence of Neoclassicism

Dilip M. Nachane
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Dilip M. Nachane: Indira Gandhi Institute of Development Research

Chapter Chapter 2 in Critique of the New Consensus Macroeconomics and Implications for India, 2018, pp 39-60 from Springer

Abstract: Abstract The 1970s heralded the dawn of a difficult era for the global economy. Inflation which had been fairly subdued in the 1960s suddenly started flaring up. But this was not accompanied by any decrease in unemployment rates as the Keynesian Phillips curve analysis, so popular at that time, would have led us to expect. Against this background, the earlier criticisms launched by Friedman (J Polit Econ 78(2):193–238, 1970) against the Keynesianism then prevalent, started attracting attention, and the doctrine of monetarism that he proposed as an alternate theoretical framework, gradually gained ascendancy, till by the end of the 1970s, it displaced IS-LM Keynesianism as the dominant mainstream paradigm. This chapter elaborates on the main tenets of monetarism including the modern quantity theory, the natural rate hypothesis, monetary policy rules and flexible exchange rates.

Date: 2018
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DOI: 10.1007/978-81-322-3920-8_2

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