What’s Right with Macroeconomics?

What’s Right with Macroeconomics?

The Cournot Centre series

Edited by Robert M. Solow and Jean-Philippe Touffut

Global crises are very rare events. After the Great Depression and the Great Stagflation, new macroeconomic paradigms associated with a new policy regime emerged. This book addresses how some macroeconomic ideas have failed, and examines which theories researchers should preserve and develop. It questions how the field of economics – still reeling from the global financial crisis initiated in the summer of 2007 – will respond.

Chapter 2: Model comparison and robustness: a proposal for policy analysis after the financial crisis

Volker Wieland

Subjects: economics and finance, methodology of economics


In the aftermath of the financial crisis, the state of macroeconomic modelling and the use of macroeconomic models in policy analysis have come under heavy criticism. Media and other commentators have criticized macroeconomists for failing to predict the Great Recession of 2008–09, or at least for failing to provide adequate warning of the risk of such a recession. Practitioners have attributed this failure to academic and central bank researchers’ love of a particular modelling paradigm. They blame so-called dynamic stochastic general equilibrium (DSGE) models for misdirecting the attention of policy makers. Indeed, even some wellknown academics-cum-bloggers have published scathing commentaries on the current state of macroeconomic modelling. On 3 March 2009, Willem Buiter wrote on the Financial Times blog, ‘the typical graduate macroeconomics and monetary economics training received at Anglo- American universities during the past 30 years or so, may have set back by decades serious investigations of aggregate economic behaviour and economic policy-relevant understanding’. This view was echoed by Nobel Laureate Paul Krugman on 11 June 2009 in the weekly Economist, ‘Most work in macroeconomics in the past 30 years has been useless at best and harmful at worst’.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information