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New models for macroeconomic policy
Recent economic events cast doubt on the standard macroeconomic models. This column looks at new economic models built on the idea that inequality and income risk matter for the business cycle and long-run outcomes. While still in their infancy, these models show promise in addressing the concerns about the old New Keynesian models, and in bringing about a shift in the way that macroeconomists think about aggregate fluctuations and stabilisation policy. In a thought-provoking speech, Federal Reserve Chair Janet Yellen recently expressed her discontent with macroeconomic research, and the guidance it provides in ... (full story)