Examining Alternative Macroeconomic Theories

Bruce C. Greenwald and

BCG

Bruce C. Greenwald Bell Communications Research

Joseph E. Stiglitz

Joseph E. Stiglitz Professor - Columbia University, Nobel Laureate, Economics

Discussants: Robert E. Hall and

Robert E. Hall Robert and Carole McNeil Joint Hoover Senior Fellow and Professor of Economics - Stanford University

Stanley Fischer

Stanley Fischer Vice Chairman of the Board of Governors of the Federal Reserve System

THE PAST TWO DECADES have witnessed intense competition among
theories attempting to explain macroeconomic behavior. Alternative
theories have made claims with respect both to the purity of their
methodology and to their ability to explain the “facts.” This paper
reviews the ability of three of the major competitors-new classical,
traditional Keynesian, and what we call new Keynesian theories-to
explain what we take to be the most important stylized facts. Our
perspective is unabashedly biased: we believe that new Keynesian
theories-particularly those focusing on the consequences of imperfections
in the capital, goods, and labor markets arising from imperfect and
costly information-provide the best available explanation.