%0 Report
%A Palacio Vera, Alfonso
%T The modern view of macroeconomics : some critical reflections
%J Documentos de Trabajo de la Facultad de Ciencias Económicas y Empresariales
%D 2002
%@ 2255-5471
%U https://hdl.handle.net/20.500.14352/64471
%X Romer has proposed an alternative macroeconomic framework, i.e., the IS-MP-IA model. Its proponents claim that it constitutes a ‘modern’ view of macroeconomics. We show that the new framework is closely attached to the neoclassical synthesis and, in addition, fails to take account of: (i) the recent empirical evidence on the short-run output-inflation trade-off, (ii) the recent work and evidence on the interdependence of aggregate demand and supply, (iii) the limits of monetary policy and (iv) the consequences for demand-management policy of (i), (ii) and (iii). Once all these aspects are incorporated, we have that short-run stabilization policy is non-neutral in the long run, loanable funds theory becomes irrelevant and aggregate demand becomes the crucial exogenous variable in the short run and, perhaps, also in the long run.
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