On the future of macroeconomics: a New Monetarist perspective

This article argues that a pressing goal for macroeconomics is to incorporate financial considerations, but we need models with solid microfoundations. In particular, the use of assets in facilitating exchange, as well as different credit (or other financial) arrangements, should be outcomes of, not inputs to, theories. As a preview, I suggest that mainstream macro does a good job explaining many phenomena, and a financial crisis does not disprove such theory. But understanding crises requires better incorporating factors related to money, credit, banking, and liquidity. The approach called New Monetarist economics can help a lot in this regard.