New Keynesian economics is a school of macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of new classical macroeconomics.
In economics and political science,fiscal policy is the use of government revenue collection and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variables developed in reaction to the Great Depression of the 1930s,when the previous laissez-faire approach to economic management became unworkable. Fiscal policy is based on the theories of the British economist John Maynard Keynes,whose Keynesian economics theorised that government changes in the levels of taxation and government spending influence aggregate demand and the level of economic activity. Fiscal and monetary policy are the key strategies used by a country's government and central bank to advance its economic objectives. The combination of these policies enables these authorities to target inflation and to increase employment. In modern economies,inflation is conventionally considered "healthy" in the range of 2%–3%. Additionally,it is designed to try to keep GDP growth at 2%–3% percent and the unemployment rate near the natural unemployment rate of 4%–5%. This implies that fiscal policy is used to stabilise the economy over the course of the business cycle.
Monetary economics is the branch of economics that studies the different theories of money:it provides a framework for analyzing money and considers its functions,and it considers how money can gain acceptance purely because of its convenience as a public good. The discipline has historically prefigured,and remains integrally linked to,macroeconomics. This branch also examines the effects of monetary systems,including regulation of money and associated financial institutions and international aspects.
Monetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability. Further purposes of a monetary policy may be to contribute to economic stability or to maintain predictable exchange rates with other currencies. Today most central banks in developed countries conduct their monetary policy within an inflation targeting framework,whereas the monetary policies of most developing countries' central banks target some kind of a fixed exchange rate system. A third monetary policy strategy,targeting the money supply,was widely followed during the 1980s,but has diminished in popularity since that,though it is still the official strategy in a number of emerging economies.
George William Miller was an American businessman and investment banker who served as the 65th United States secretary of the treasury from 1979 to 1981. A member of the Democratic Party,he also served as the 11th chairman of the Federal Reserve from 1978 to 1979. Miller was the first person to hold both of those posts.
Edward Christian Prescott was an American economist. He received the Nobel Memorial Prize in Economics in 2004,sharing the award with Finn E. Kydland,"for their contributions to dynamic macroeconomics:the time consistency of economic policy and the driving forces behind business cycles". This research was primarily conducted while both Kydland and Prescott were affiliated with the Graduate School of Industrial Administration at Carnegie Mellon University. According to the IDEAS/RePEc rankings,he was the 19th most widely cited economist in the world in 2013. In August 2014,Prescott was appointed an Adjunct Distinguished Economic Professor at the Australian National University (ANU) in Canberra,Australia. Prescott died of cancer on November 6,2022,at the age of 81.
John Brian Taylor is the Mary and Robert Raymond Professor of Economics at Stanford University,and the George P. Shultz Senior Fellow in Economics at Stanford University's Hoover Institution.
Ben Shalom Bernanke is an American economist who served as the 14th chairman of the Federal Reserve from 2006 to 2014. After leaving the Federal Reserve,he was appointed a distinguished fellow at the Brookings Institution. During his tenure as chairman,Bernanke oversaw the Federal Reserve's response to the late-2000s financial crisis,for which he was named the 2009 Time Person of the Year. Before becoming Federal Reserve chairman,Bernanke was a tenured professor at Princeton University and chaired the Department of Economics there from 1996 to September 2002,when he went on public service leave. Bernanke was awarded the 2022 Nobel Memorial Prize in Economic Sciences,jointly with Douglas Diamond and Philip H. Dybvig,"for research on banks and financial crises",more specifically for his analysis of the Great Depression.
In macroeconomics,inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the medium-term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability,and price stability is achieved by controlling inflation. The central bank uses interest rates as its main short-term monetary instrument.
Modern monetary theory or modern money theory (MMT) is a heterodox macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires. According to MMT,governments do not need to worry about accumulating debt since they can create new money by using fiscal policy in order to pay interest. MMT argues that the primary risk once the economy reaches full employment is inflation,which acts as the only constraint on spending. MMT also argues that inflation can be addressed by increasing taxes on everyone to reduce the spending capacity of the private sector.
Quantitative easing (QE) is a monetary policy action where a central bank purchases predetermined amounts of government bonds or other financial assets in order to stimulate economic activity. Quantitative easing is a novel form of monetary policy that came into wide application after the financial crisis of 2007–2008. It is used to mitigate an economic recession when inflation is very low or negative,making standard monetary policy ineffective. Quantitative tightening (QT) does the opposite,where for monetary policy reasons,a central bank sells off some portion of its holdings of government bonds or other financial assets.
Dynamic stochastic general equilibrium modeling is a macroeconomic method which is often employed by monetary and fiscal authorities for policy analysis,explaining historical time-series data,as well as future forecasting purposes. DSGE econometric modelling applies general equilibrium theory and microeconomic principles in a tractable manner to postulate economic phenomena,such as economic growth and business cycles,as well as policy effects and market shocks.
Charles L. Evans is the former ninth president and chief executive officer of the Federal Reserve Bank of Chicago,serving from 2007 to 2023. In that capacity,he served on the Federal Open Market Committee (FOMC),the Federal Reserve System's monetary policy-making body.
The fiscal theory of the price level is the idea that government fiscal policy,including debt and taxes present and future,is the primary determinant of the price level or inflation as opposed to the quantity theory of money. FTPL requires confidence the government will not default on its debts,but rather 'inflate away' debts. FTPL suggests that currency is like a stock in a government and if the government has structural deficit then the 'stock' loses value.
In economics,stimulus refers to attempts to use monetary policy or fiscal policy to stimulate the economy. Stimulus can also refer to monetary policies such as lowering interest rates and quantitative easing.
Macroeconomic theory has its origins in the study of business cycles and monetary theory. In general,early theorists believed monetary factors could not affect real factors such as real output. John Maynard Keynes attacked some of these "classical" theories and produced a general theory that described the whole economy in terms of aggregates rather than individual,microeconomic parts. Attempting to explain unemployment and recessions,he noticed the tendency for people and businesses to hoard cash and avoid investment during a recession. He argued that this invalidated the assumptions of classical economists who thought that markets always clear,leaving no surplus of goods and no willing labor left idle.
The new neoclassical synthesis (NNS),which is now generally referred to as New Keynesian economics,and occasionally as the New Consensus,is the fusion of the major,modern macroeconomic schools of thought –new classical macroeconomics/real business cycle theory and early New Keynesian economics –into a consensus view on the best way to explain short-run fluctuations in the economy. This new synthesis is analogous to the neoclassical synthesis that combined neoclassical economics with Keynesian macroeconomics. The new synthesis provides the theoretical foundation for much of contemporary mainstream macroeconomics. It is an important part of the theoretical foundation for the work done by the Federal Reserve and many other central banks.
Carlos A. Végh is a Uruguayan academic economist who,since 2013,is the Fred H. Sanderson Professor of International Economics at the Johns Hopkins School of Advanced International Studies (SAIS),and holds a joint appointment with Johns Hopkins' Department of Economics. He is also a research associate at the National Bureau of Economic Research since 1998. He was the World Bank's chief economist for Latin America and the Caribbean from February 1,2017 to June 30,2019,while on leave from Johns Hopkins. He was previously a professor of economics and vice-chair of undergraduate studies at UCLA (1996-2005) and professor of economics at the University of Maryland (2005-2013). His research work on monetary and fiscal policy in emerging and developing countries has been highly influential in both academic and policy circles. In particular,his work on fiscal procyclicality in emerging markets has been instrumental in generating a copious literature on the subject,which has influenced the adoption of fiscal rules in many emerging markets.
Thomas MacGillivray Humphrey was an American economist. Until 2005 he was a research advisor and senior economist in the research department of the Federal Reserve Bank of Richmond and editor of the bank's flagship publication,the Economic Quarterly. His publications cover macroeconomics,monetary economics,and the history of economic thought. Mark Blaug called him the "undisputed master" of British classical monetary thought.
Sudhakar Rao Aiyagari was an Indian-born economics professor at the University of Rochester. He had previous been a leading research economist at the Minneapolis Fed,prior to which he had taught,in the 1980s,at New York University,University of Wisconsin,Madison,and Carnegie-Mellon University in Pittsburgh.
