Rethinking Macroeconomic Policy
Authors: Olivier Jean Blanchard (International Monetary Fund), Giovanni Dell’Ariccia (International Monetary Fund), Paolo Mauro (International Monetary Fund)
Abstract
The great moderation lulled macroeconomists and policymakers alike in the belief that we knew how to conduct macroeconomic policy. The crisis clearly forces us to question that assessment. In this paper, we review the main elements of the precrisis consensus, identify where we were wrong and what tenets of the precrisis framework still hold, and take a tentative first pass at the contours of a new macroeconomic policy framework.
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Modeling Macroeconomic Variations After COVID-19Serena Ng · 2021 · Econometrics · preprint, not peer reviewed · cited 79 times · AI summary available
Modeling Macroeconomic Variations After COVID-19 examines how the pandemic alters macroeconomic data and forecasting, a later policy challenge adjacent to the crisis framework reviewed here.
Abstract
The coronavirus is a global event of historical proportions and just a few months changed the time series properties of the data in ways that make many pre-covid forecasting models inadequate. It also creates a new problem for estimation of economic factors and dynamic causal effects because the variations around the outbreak can be interpreted as outliers, as shifts to the distribution of existing shocks, or as addition of new shocks. I take the latter view and use covid indicators as controls to 'de-covid' the data prior to estimation. I find that economic uncertainty remains high at the end of 2020 even though real economic activity has recovered and covid uncertainty has receded. Dynamic…
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On Bayesian Filtering for Markov Regime Switching ModelsNigar Hashimzade, Oleg Kirsanov, Tatiana Kirsanova et al. · 2024 · Econometrics · cited 1 time · AI summary available
On Bayesian Filtering for Markov Regime Switching Models presents estimation tools for regime-switching DSGE models, which can support macroeconomic analysis but does not assess policy principles.
Abstract
This paper presents a framework for empirical analysis of dynamic macroeconomic models using Bayesian filtering, with a specific focus on the state-space formulation of Dynamic Stochastic General Equilibrium (DSGE) models with multiple regimes. We outline the theoretical foundations of model estimation, provide the details of two families of powerful multiple-regime filters, IMM and GPB, and construct corresponding multiple-regime smoothers. A simulation exercise, based on a prototypical New Keynesian DSGE model, is used to demonstrate the computational robustness of the proposed filters and smoothers and evaluate their accuracy and speed for a selection of filters from each family. We show …
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Why Economic Theories and Policies Fail? Unnoticed Variables and Overlooked EconomicsVictor Olkhov · 2022 · General Economics · cited 1 time · AI summary available
Why Economic Theories and Policies Fail? Unnoticed Variables and Overlooked Economics asks why economic theories and policies fail, focusing on overlooked factors behind economic dynamics.
Abstract
Accuracy of economic theories and efficiency of economic policy strictly depend on the choice of the economic variables and processes mostly liable for description of economic reality. That states the general problem of assessment of any possible economic variables and processes chargeable for economic evolution. We show that economic variables and processes described by current economic theories constitute only a negligible fraction of factors responsible for economic dynamics. We consider numerous unnoted economic variables and overlooked economic processes those determine the states and predictions of the real economics. We regard collective economic variables, collective transactions and…
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Threadneedle: An Experimental Tool for the Simulation and Analysis of Fractional Reserve Banking SystemsJacky Mallett · 2015 · General Finance · preprint, not peer reviewed · cited 1 time · Not summarized yet
Threadneedle simulates how banking and regulatory frameworks affect the macroeconomy, connecting financial-system design to the policy framework considered here.
Abstract
Threadneedle is a multi-agent simulation framework, based on a full double entry book keeping implementation of the banking system's fundamental transactions. It is designed to serve as an experimental test bed for economic simulations that can explore the banking system's influence on the macro-economy under varying assumptions for its regulatory framework, mix of financial instruments, and activities of borrowers and lenders. Support is provided for Basel Capital and central bank reserve regulatory frameworks, inter-bank lending and correct handling of loan defaults within the bank accounting framework. In this paper we provide an overview of the design of Threadneedle, and the rational fo…
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Teaching Economics and Providing Visual "Big Pictures"Seyyed Ali Zeytoon Nejad Moosavian · 2016 · Economics · cited 14 times · AI summary available
Teaching Economics and Providing Visual "Big Pictures" studies how to teach economics concepts, rather than evaluating macroeconomic policy.
Abstract
The goal of this paper is to investigate the importance of providing visual "big pictures" in the teaching of economics. The plurality and variety of concepts, variables, diagrams, and models involved in economics can be a source of confusion for many economics students. However, reviewing the existing literature on the importance of providing visual "big pictures" in the process of learning suggests that furnishing students with a visual "big picture" that illustrates the ways through which those numerous, diverse concepts are connected to each other could be an effective solution to clear up the mentioned mental chaos. As a practical example, this paper introduces a "big picture" that can …
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Decision making in Economics -- a behavioral approachAmitesh Saha · 2020 · General Economics · preprint, not peer reviewed · AI summary available
Decision making in Economics -- a behavioral approach reviews psychological and social influences on individual decisions, a neighbouring topic to macroeconomic policy design.
Abstract
We review economic research regarding the decision making processes of individuals in economics, with a particular focus on papers which tried analyzing factors that affect decision making with the evolution of the history of economic thought. The factors that are discussed here are psychological, emotional, cognitive systems, and social norms. Apart from analyzing these factors, it deals with the reasons behind the limitations of rational decision-making theory in individual decision making and the need for a behavioral theory of decision making. In this regard, it has also reviewed the role of situated learning in the decision-making process.
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The Macroeconomic Effects of Corporate Tax ReformsFrancesco Furno · 2021 · General Economics · cited 1 time · AI summary available
The Macroeconomic Effects of Corporate Tax Reforms uses a general-equilibrium model to assess tax-policy effects, addressing macroeconomic policy with a specific quantitative approach.
Abstract
This paper extends a standard general equilibrium framework with a corporate tax code featuring two key elements: tax depreciation policy and the distinction between c-corporations and pass-through businesses. In the model, the stimulative effect of a tax rate cut on c-corporations is smaller when tax depreciation policy is accelerated, and is further diluted in the aggregate by the presence of pass-through entities. Because of a highly accelerated tax depreciation policy and a large share of pass-through activity in 2017, the model predicts small stimulus, large payouts to shareholders, and a dramatic loss of corporate tax revenues following the Tax Cuts and Jobs Act (TCJA-17). These predic…
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The public debt multiplierAlice Albonico, Guido Ascari, Alessandro Gobbi · 2020 · Journal of Economic Dynamics and Control,Volume 132, November 2021, 104204 · cited 16 times · Not summarized yet
The public debt multiplier studies how debt and fiscal policy affect activity during normal times and crises, a specific issue within the broader crisis-policy reassessment.
Abstract
We study the effects on economic activity of a pure temporary change in government debt and the relationship between the debt multiplier and the level of debt in an overlapping generations framework. The debt multiplier is positive but quite small during normal times while it is much larger during crises. Moreover, it increases with the steady state level of debt. Hence, the call for fiscal consolidation during recessions seems ill-advised. Finally, a rise in the steady state debt-to-GDP level increases the steady state real interest rate providing more room for manoeuvre to monetary policy to fight deflationary shocks.
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Updated on 8 November 2026.