Brief History of Macroeconomic Thought and Policy

3. Macroeconomics for the 21st Century

The Rise of New Keynesian Economics

New Keynesian economics emerged in the last three decades as the dominant school of macroeconomic thought for two reasons. First, it successfully incorporated important monetarist and new classical ideas into Keynesian economics. Second, developments in the 1980s and 1990s shook economists' confidence in the ability of the monetarist or the new classical school alone to explain macroeconomic change.