Abstract

This paper surveys some of the main developments in macroeconomics since the anti-Keynesian counter-revolution 40 years ago. It covers both mainstream and heterodox economics. Amongst the topics discussed are: New Keynesian economics, Modern Monetary Theory, expansionary fiscal contraction, unconventional monetary policy, the Phillips curve, hysteresis, and heterodox theories of growth and distribution. The conclusion is that Keynesian economics is alive and well, and that there has been a degree of convergence between heterodox and mainstream economics.

Highlights

  • When Thomas Palley asked me to give this year’s Godley–Tobin Lecture, he suggested that I might present my views about modern developments in macroeconomics

  • My conclusion is that Keynesian economics has made a comeback in the UK and the USA

  • This belief is frequently allied with the view that the economy would respond to much lower interest rates if only the lower bound could be breached

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Summary

INTRODUCTION

When Thomas Palley asked me to give this year’s Godley–Tobin Lecture, he suggested that I might present my views about modern developments in macroeconomics. I baulked at the idea of covering such a vast field, but I decided it would be an interesting challenge. To the extent that there is one, the underlying theme of my lecture is that, since the initial anti-Keynesian counter-revolution 40 years ago, Keynesian economics has made something of a comeback. It would be an exaggeration to say that ‘we are all Keynesians now’, but surveys indicate that many leading economists in the USA and the UK have Keynesian sympathies (CFM 2014; IGM Forum 2014)

BACKGROUND
THE NEW KEYNESIANS
OTHER MODELS
THE FINANCIAL CRISIS
WYNNE GODLEY
AUSTERITY
EXPANSIONARY FISCAL CONTRACTION
10 UNCONVENTIONAL MONETARY POLICY
11 THE PHILLIPS CURVE
12 HYSTERESIS
13 MONETARY POLICY WHEN THERE IS HYSTERESIS
14 HYSTERESIS AND GOVERNMENT DEBT
Findings
16 CONCLUSION
Full Text
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