What's Wrong with Modern Macroeconomics? Why its Critics have Missed the Point<xref ref-type="fn" rid="FN1">-super-1

The blame for the recent financial crisis has been attributed to modern macroeconomic theory rather than banking and finance. This article defends modern macroeconomics against its critics arguing that the critics have missed the point of why macroeconomics is carried out in the way it is. It also defends finance from some criticisms, especially of the efficient markets hypothesis. It is claimed that, far from being in a state of crisis as a result of recent events, modern macroeconomics has received a huge stimulus, and that the financial crisis was brought about more by a failure to employ modern macroeconomics than by the failings of macroeconomics. (JEL code: E00) Copyright The Author 2010. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.