Macroeconomics – developments and modern trends

Abstract

Ever since the publication of Keynes’ The General Theory in 1936, both the theoretical and methodological content of macroeconomics, and the role of economic policy, have seen continued change. In contemporary times, macroeconomics is dominated by the New Neoclassical Synthesis (NNS) and the dynamic stochastic general equilibrium (DSGE) models. However, since the Great Recession, the modern mainstream has been increasingly exposed to criticism from various alternatives of a more heterodox nature. The aims of this article are threefold. First, to give a selected presentation on the development of modern macroeconomics. Second, to address why and how the NNS has become the dominant (and, for most mainstreamers, the only) way of analysing macroeconomic phenomena. Third, to present two alternatives to the mainstream that might challenge the future dominance of this thinking.