Some alternative perspectives on macroeconomic theory And some policy implications 1 By William R White

Everyone is painfully aware that we have just gone through a major economic and financial crisis which touched all parts of the global economy. Output levels fell sharply and unemployment and poverty rose commensurately. Many financial markets became dysfunctional and important financial institutions had to be merged or recapitalized by governments. Nor is it at all clear that the current “green shoots” of recovery will not be followed by yet another serious downturn. And the fact that an unprecedented easing of monetary and fiscal stimulus had less than expected effects on growth in some countries raises question about the effectiveness of macroeconomic policies looking forward. Against this background, one piece of good news is that the crisis has prompted some economists to rethink what they believe about how the economy works. Hopefully, such reflections will eventually lead to improvements in both macroeconomic analysis and policy prescriptions.