New Classical macroeconomics

E52658

economic theory macroeconomic school of thought research program in macroeconomics

New Classical macroeconomics is a school of thought that emphasizes rational expectations, market-clearing models, and the idea that systematic monetary policy has limited real effects on output and employment.

Aliases (2)

New Classical economists ×1
New classical macroeconomics ×1

Statements (49)

Predicate	Object
instanceOf	economic theory → macroeconomic school of thought → research program in macroeconomics →
academicContext	postwar neoclassical synthesis debate →
associatedWith	Edward C. Prescott → Neil Wallace → Robert E. Lucas Jr. → Robert J. Barro → Robert J. Hodrick → Thomas J. Sargent →
basedOn	Walrasian market-clearing framework → general equilibrium theory → rational expectations hypothesis →
contrastsWith	Keynesian macroeconomics → New Keynesian economics → traditional IS-LM analysis →
coreClaim	agents use all available information efficiently → business cycles are largely responses to real shocks or information shocks → markets tend to clear continuously → only unanticipated monetary shocks affect real variables in the short run → policy rules are preferable to discretionary policy → systematic monetary policy has limited real effects on employment → systematic monetary policy has limited real effects on output →
critiquedFor	assuming continuous market clearing → downplaying nominal rigidities → limited empirical support for strong neutrality of money in short run →
developedIn	1970s → 1980s →
emphasizes	intertemporal optimization → market-clearing models → microfoundations of macroeconomics → rational expectations → representative agent models →
field	macroeconomics →
influenced	New Keynesian economics → modern macroeconomic modeling → real business cycle theory →
influencedBy	Chicago school of economics → Milton Friedman → monetarism →
policyImplication	activist stabilization policy is largely ineffective → emphasis on credibility and commitment in policy → monetary policy should follow fixed rules →
regionOfOrigin	United States →
supportsView	Lucas critique of traditional policy evaluation → agents cannot be systematically fooled by policy → expectations are model-consistent →
uses	dynamic stochastic general equilibrium models → intertemporal optimization under rational expectations →

Referenced by (7)

Subject (surface form when different)	Predicate
IS-LM model ("New Classical economists") → Keynesian economics ("New classical macroeconomics") →	criticizedBy
New Neoclassical Synthesis →	combinesElementsOf
New Keynesian economics →	contrastsWith
permanent income hypothesis →	influenced
John B. Taylor →	influencedBy
New Neoclassical Synthesis →	sharesFeatureWith