Theoretical Developments in the Light of Macroeconomic Policy and Empirical Research.

Macroeconomics is surveyed with emphasis on the implications of the new classical and rational expectations critiques for the Keynesian paradigm and the role of macro policies. At the background are the main macro developments of the 1970s and 1980s, as well as the specific lessons of recent high (chronic) inflation processes. A synthesis is emerging in which the basic Keynesian view of the existence of market and price coordination failures, as well as room for Pareto-improving policy intervention, are maintained. At the same time, the theoretical underpinnings are undergoing substantial change, mainly due to a "rational expectations" reformulation. Copyright 1989 by The editors of the Scandinavian Journal of Economics.