This essay discusses the reasons for and implications of the decline in real interest rates around the world over the past several decades. It suggests that the decline in interest rates is largely explicable from trends in saving, growth, and markups. In this environment, greater government...

This paper examines the optimal accumulation of capital and the effects of government debt in neoclassical growth models in which firms have market power and therefore charge prices above marginal cost. In this environment, the real interest rate earned by savers is less than the net marginal...

This paper discusses the conduct and performance of U.S. monetary policy during the 1990s, comparing it to policy during the previous several decades. It reaches four broad conclusions. First, the macroeconomic performance of the 1990s was exceptional, especially if judged by the volatility of...

This paper discusses the short-run tradeoff between inflation and unemployment. Although this tradeoff remains a necessary building block of business cycle theory, economists have yet to provide a completely satisfactory explanation for it. According to the consensus view among central bankers...

The macroeconomic analysis of fiscal policy is usually based on one of two canonical models--the Barro-Ramsey model of infinitely-lived families or the Diamond-Samuelson model of overlapping generations. This paper argues that neither model is satisfactory and suggests an alternative. In the...

This paper discusses the reemergence of Keynesian economics during the past decade. It highlights the substantial differences between new Keynesian economics and the convictions of early Keynesians. In particular, it points out that new Keynesians have adopted many views that were once...

This paper presents a non-technical discussion of some of the important developments in macroeconomics over the past twenty years. It considers three broad categories of research. First, it discusses how the notion of rational expectations has affected economists' views on the role of economic...

This paper is a critique of the latest new classical theory of economic fluctuations. According to this theory, the business cycle is the natural and efficient response of the economy to exogenous changes in the available production technology. This paper discusses several versions of this...

This paper outlines the major developments in macroeconomics over the past two decades. It examines the reasons for the breakdown in the consensus view of the 1960s and how this breakdown has guided research in macroeconomics. The introduction and importance of "rational expectations" are...

This paper presents a simple general equilibrium model in which the only non-Walrasian feature is imperfect competition in the goods market. The model is shown to exhibit various Keynesian characteristics. In particular, as competition in the goods market becomes less perfect, the fiscal policy...