The global economic recession and the change in the macroeconomic paradigm

Abstract

All countries have felt the impact of the recession, the phase characteristic of negative effects such as slower economic growths (stagnation), high inflation rates and high unemployment rates. The economic crisis that has befallen even the most developed economies of the world is often compared to the crisis that happened in the 1930s, along with the attempts to pin down its causes in order to find the economic policy for its overcoming. Economic policy creators and policy decision-makers have to solve the question of how the crisis is to be overcome. Economic measures that should lead to overcoming the negative economic trends are primarily directed at encouraging aggregate supply, that is, a macroeconomic theory known as Keynesian economics based on the ideas of 30th century British economist John Maynard Keynes that he published during the Depression. Up to this day economies have not faced such a downfall as happened during this crisis, since the crisis brought about not only changes in the economic theory and the end of the so-called classic economic theories, but it also made way for a new scientific discipline based on Keynesian theory. There were changes in economic policies and an active policy of managing aggregate supply was introduced. Aggregate supply was based on monetary and fiscal expansion, that is, the world monetary and financial system. It is expected today that the crisis we are now facing will lead to the change in the dominant macroeconomic paradigm as well as to the creation of a new financial system which will be more transparent and regular.