Abstract
At least four heterodox theories have gained increasing popularity in response to the Great Recession. These include a revival of old Keynesian macroeconomics, the view that the central bank should try to prevent asset price bubbles, the NeoFisherian perspective, and market monetarism, which is my own view. All of these perspectives can be seen as the profession wrestling with the implications of near-zero interest rates. In my view, pre-2008 macro theory provides all of the tools we need to understand the Great Recession. A policy of nominal GDP targeting, perhaps guided by market forecasts, could have greatly moderated the 2007-09 slump.
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