The Global Financial Crisis, Macroeconomic Theories and Policy Responses
On May 14, 2018, Jovan Djuraskovic, Milivoje Radovicrmic and Milena Radonjic Konatar have published an article entitled “The Controversies of Modern Macroeconomic Theory in the Context of the Global Economic Crisis” in the Journal of Central Banking Theory and Practice.
A Blog Post by Pablo Markin.
In their analytical paper, Djuraskovic, Radovicrmic and Radonjic Konatar have concentrated on the “[i]deas, disagreements and similarities between the most important [macroeconomic] theories in relation to state intervention and anti-crisis economic policy” (49) as theoretical subjects. In doing so, these authors have discussed the distinctive features of Keynesian and monetarist economic theories, as part of their exploration of “the causes of the [last] global economic crisis” (51). In this context, Djuraskovic and his colleagues note that “[i]n a crisis, solutions are sought in anti-cyclical economic policies” (56).
According to the argument of Djuraskovic, Radovicrmic and Radonjic Konatar, “[t]he theoretical disagreement between Keynesians and monetarists was due to different views on monetary policy. Keynesians emphasized the primacy of interest rates, and monetarists the ultimate role of money supply” (58). As part of their policy analysis, these researchers further add that, “[r]esponding to the Keynesian claim on the impotence of monetary policy, monetarists pointed out that the reduction in interest rates is not a sufficient condition for expansionary monetary and credit policies in crisis” (58).
As part of their conclusions, Djuraskovic and others have highlighted that “[a]nti-cyclical monetary policy measures were not sufficient for a faster recovery” (68) during the post-2008 global economic recession. These scholars remark that “[b]y analysing the structure and allocation of fiscal stimuli in the US, EU and China, it can be noted that the governments’ intention was to stimulate (Keynesian) aggregate demand and launch important structural reforms through investments in long-term projects” (69).
By Pablo Markin
Featured Image Credits: SM19 – Bretton Woods at 75 – Rethinking International Cooperation, April 10, 2019 | © Courtesy of Stephen Jaffe/International Monetary Fund/Flickr.