Recent Developments in Macroeconomic Analysis: Reviving the Case for Stabilisation Policies

This paper surveys developments in the positive and normative analysis of stabilisation policies over the past fifteen years as well as their influence on the actual conduct of policies. It is found that, from an analytical perspective, there is now a well-founded case for prudent stabilisation policies, with already successful applications in the area of monetary policy. On the fiscal side, however, better analysis has not translated yet into markedly improved policies due to serious political impediments. To conclude, the paper also briefly touches upon the potential macroeconomic benefits of recent changes in monetary policy regimes.