Theoritical Seekings in Macroeconomics

Abstract

Dynamics stochastics general equilibrium (DSGE) models are dominant until the 2008 global financial crisis. Although some economists have stated that macroeconomics is a mature science, others believe that macroeconomics that is based on DSGE models has come to its end. Although these opinions are not true, the validity of macroeconomic theories that are based on unreal assumptions and ignore the probability of financial crisis have been questioned during the global financial crisis. This study investigates how macroeconomics has been affected by the global financial crisis on a theoretical basis. The first aim of this study is to determine how valid DSGE models are currently. Another purpose of this study is to find out why macroeconomics failed to predict the global financial crisis and the inadequacies of macroeconomics. Relevant studies have been examined to determine how “macroeconomic theories” has been affected by the financial crisis from both theoretical and economic policy perspectives and issues that economists have different opinions on. In this context, it can be said that DSGE models were not sufficient to predict the financial crisis, and it is essential to use unconventional monetary and fiscal policies to overcome a financial crisis.

Keywords

• dynamics stochastics general equilibrium
• monetary policy
• fiscal policy