Modern Paradigm in Macroeconomic Monetary Theories

Abstract

In this paper we tried to present an objective perspective over modern monetary theories andtheir impact on economic activity. In the end, our research stressed some specific actions thatinfluence the macroeconomic equilibrium. Neoclassical and New Keynesian trends supported modern macroeconomic stabilizationpolicies. New Keynesian paradigm assumed that, in general, agents have rational expectations. Thiscontroversial subject points out that although the expectations can be wrong on average they areactually correct. Neoclassical economists will have a different approach towards the theory of expectations,saying that decisions were based on the expectations that people have and not on what reallyhappen. We appreciated that in order to achieve macroeconomic stability a mix between monetary andfiscal policies is needed, fixed rules should be applied in interdependence with discretionarygovernment measures and acting upon incomes is the best way to fight against inflation.

Keywords

• neoclassical
• New Keynesian
• rational expectations