Template-type: ReDIF-Paper 1.0
Author-Name: Alfonso Palacio Vera
Author-Workplace-Name: Departamento de Economía Aplicada, Pública y Política. Universidad Complutense de Madrid.
Author-Workplace-Homepage: https://www.ucm.es/eapp
Title: The "Modern" View of Macroeconomics: Somo Critical Reflections 
Abstract: Romer has proposed an alternative macroeconomic framework, i.e., the IS-MP-IA model. Its proponents claim that it constitutes 
	a ‘modern’ view of macroeconomics. We show that the new framework is closely attached to the neoclassical synthesis and, in 
	addition, fails to take account of: (i) the recent empirical evidence on the short-run output-inflation trade-off, (ii) the 
	recent work and evidence on the interdependence of aggregate demand and supply, (iii) the limits of monetary policy and (iv) 
	the consequences for demand-management policy 	of (i), (ii) and (iii). Once all these aspects are incorporated, we have that 
	short-run stabilization policy is non-neutral in the long run, loanable funds theory becomes irrelevant and aggregate demand 
	becomes the crucial exogenous variable in the short run and, perhaps, also in the long run.
Classification-JEL: A22, E10, E50, E60. 
Keywords: Neutrality of money, NAIRU, Natural rate of interest, Aggregate demand.
Length: 36 pages
Creation-Date: 2002 
Number: 02-17
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doctra02-17.txt
File-URL: https://eprints.ucm.es/id/eprint/6796/1/0217.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doctra:02-17