ABSTRACT
The New Macroeconomics is in many ways a return to the classical world with minimal state intervention in the working of the economy. Market forces can be relied upon to take an economy to full employment. The epitome of the New Macroeconomics has found expression in austerity policies adopted by several countries in the post-global financial crisis era. To eliminate the use of discretionary powers by the government, the New Classical economists suggested the responsibility for an anti-inflationary policy to be assigned to an ‘independent central bank’. With a growing consensus on the absence of the necessary elements of policy-making in the New Consensus Macroeconomics framework, it is only a matter of time before it becomes redundant even in mainstream macroeconomics discourse. As economic growth surged ahead in between the mid-1980s and 2007, new macroeconomics took credit for having conquered the business cycle—euphorically called the ‘Great Moderation’.
