NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Theoretical Developments in the Light of Macroeconomic Policy and Empirical Research

Michael Bruno

NBER Working Paper No. 2757
Issued in November 1988
NBER Program(s):Economic Fluctuations and Growth, International Trade and Investment, International Finance and Macroeconomics

The paper surveys the macroeconomic literature of the last decade with emphasis on the implications of the New Classical and Rational Expectations critiques for the Keynesian paradigm and the role of macro policies. This is done on the background of the main macro developments of the l970'a and 1980's as well as the specific lessons of recent high (chronic) inflation processes. The paper takes an eclectic view emphasizing a synthesis that is emerging in which the basic Keynesian view of the existence of market and price co-ordination failures as well as room for Pareto improving policy intervention are maintained. At the same time the theoretical underpinnings are undergoing substantial change mainly due to a 'rational expectations' (rather than 'new classical') reformulation. The new Theory of Economic Policy is also discussed and illustrated in terms of recent stabilization experience.

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Document Object Identifier (DOI): 10.3386/w2757

Published: Michael Bruno, 1989. "Theoretical Developments in the Light of Macroeconomic Policy and Empirical Research," The Scandinavian Journal of Economics, vol 91(2).

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