Brief History of Macroeconomic Thought and Policy

Key Takeaways

• The actions of the Fed starting in late 1979 reflected a strong inflation constraint and a growing recognition of the impact lag for monetary policy.
• Reducing the deficit dominated much of fiscal policy discussion during the 1980s and 1990s.
• The events of the 1980s and early 1990s do not appear to have been consistent with the hypotheses of either the monetarist or new classical schools.
• New Keynesian economists have incorporated major elements of the ideas of the monetarist and new classical schools into their formulation of macroeconomic theory.