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Short‐Run Macro After the Crisis: The End of the “New” Neoclassical Synthesis?

Oliver Landmann ()
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Oliver Landmann: Institut für allgemeine Wirtschaftsforschung, Universität Freiburg

No 27, Discussion Paper Series from Department of International Economic Policy, University of Freiburg

Abstract: The Financial Crisis of 2008, and the Great Recession in its wake, have shaken up macroeconomics. The paradigm of the “New” Neoclassical Synthesis, which seemed to provide a robust framework of analysis for short‐run macro not long ago, fails to capture key elements of the recent crisis. This paper reviews the current reappraisal of the paradigm in the light of the history of macroeconomic thought. Twice in the past 80 years, a major macroeconomic crisis led to the breakthrough of a new paradigm that was to capture the imagination of an entire generation of macroeconomists. This time is different. Whereas the pre‐crisis consensus in the profession is broken, a sweeping transition to a single new paradigm is not in sight. Instead, macroeconomics is in the process of loosening the methodological straightjacket of the “New” Neoclassical Synthesis, thereby opening a door for a return to its original purpose: the study of information and coordination in a market economy.

Keywords: Financial Crisis; Great Recession; Macroeconomics; New Neoclassical Synthesis; Keynesian Economics; New Classical Economics; Great Moderation (search for similar items in EconPapers)
JEL-codes: B22 B40 E10 E12 E13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-his, nep-hpe, nep-mac and nep-pke
Date: 2014-01, Revised 2014-01
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