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New Classical Macroeconomics: A Sympathetic Account

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  • McCallum, Bennett T

Abstract

The essential ingredients of new classical macroeconomics are (1) adoptions of the equilibrium approach to model construction, (2) acceptance of the natural rate hypothesis, (3) a belief in the superiority of policy based on rules, and (4) a strong skepticism regarding the empirical relevance for macroeconomic issues of rational bubbles phenomena. Recent "Keynesian" analyses stressing the interaction of monopolistic competition with price-change menu costs are not incompatible with the new classical approach, but have not been highly successful. A new classical policy strategy that recognizes current weaknesses in macroeconomic understanding is described and rationalized, and an analytical basis for new classical skepticism regarding bubbles, sunspots, etc. is outlined. Copyright 1989 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • McCallum, Bennett T, 1989. "New Classical Macroeconomics: A Sympathetic Account," Scandinavian Journal of Economics, Wiley Blackwell, vol. 91(2), pages 223-252.
    • Handle: RePEc:bla:scandj:v:91:y:1989:i:2:p:223-52
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    Cited by:

    1. Peijie Wang, 2008. "A Spectral Analysis of Business Cycle Patterns in UK Sectoral Output," Working Papers 2008-FIN-02, IESEG School of Management.
    2. Gangopadhyay, Partha & Gangopadhyay, Renu, 2008. "Flexible reservation prices and price inflexibility," Economic Modelling, Elsevier, vol. 25(3), pages 499-511, May.
    3. Mester Ioana, 2012. "Stylized Facts Of Romanian Business Cycle. The Literature (I)," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 624-629, July.
    4. Madarász, Aladár, 2011. "Buborékok és legendák. Válságok és válságmagyarázatok - II/2. rész. A Déltengeri Társaság [Bubbles and myths, crises and explanations II/2: the South Sea bubble]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1001-1028.

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