THE NEW CONSENSUS MACROECONOMICS: AN UNRELIABLE GUIDE FOR POLICY

Abstract

This paper outlines the New Consensus Macroeconomics, and discusses three important aspects closely related to it: economic policy implications for both monetary and fiscal policies; we deal with the "natural rate of interest" from a number of perspectives, but most crucially we discuss how this concept is of central importance to the New Consensus Macroeconomics; we also discuss some of the issues and problems surrounding natural rate of interest, including what it is meant to represent, issues of uniqueness and what happens if the rate of interest is not equal to the natural rate. The central role of the Phillips' curve in the New Consensus Macroeconomics and the control of inflation is another aspect we deal with in this contribution. We offer a critique of the new Keynesian Phillips' curve, a critical focus of the New Consensus Macroeconomics.