Good enough for government work? Macroeconomics since the crisis

@inproceedings{Krugman2018GoodEF,
  title={Good enough for government work? Macroeconomics since the crisis},
  author={Paul P. Krugman},
  year={2018}
}
This paper argues that when the financial crisis came policy-makers relied on some version of the Hicksian sticky-price IS-LM as their default model; these models were ‘good enough for government work’. While there have been many incremental changes suggested to the DSGE model, there has been no single ‘big new idea’ because the even simpler IS-LM type models were what worked well. In particular, the policy responses based on IS-LM were appropriate. Specifically, these models generated the… CONTINUE READING