ABSTRACT
For those who work in banking and finance it will, perhaps, come as a surprise that the blame for the crisis has been widely attributed to modern macroeconomic theory rather than their own industry. Most people in banking and finance work with theories they regard as very different from those of modern macroeconomics, whilst most modern macroeconomic theories largely ignore banking and give only a cursory role to financial markets. Macroeconomics has been heavily criticized for assuming that financial markets are efficient and expectations are rational despite both being centre-pieces of modern finance theory.
