Economics Dictionary of Arguments

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Mause I 236f
Economic Policies/Neoclassical Synthesis: on the assumption that both Keynesian economic theory and neoclassical growth theory are considered relevant, a rule-based economic policy is recommended. (1) This view was very widespread until the global financial crises in 2008.
In the case of a large output gap, monetary policy should get active in the sense of the Taylor rule or the inflation control, and fiscal policy should accept cyclical government deficits or surpluses. By contrast, monetary and fiscal policy should be passive when the output gap is closed. In this case, economic policy should be limited to providing the institutional and regulatory framework for a positive development of production potential. (Output Gap: indicates the severity of an economic downturn.)
Problem: it is difficult to distinguish between changes in actual output and changes in production potential.

1. Marvin Goodfriend, & Robert G. King.,The new neoclassical synthesis and the role of monetary policy. In NBER Macroeconomics annual, Hrsg. Ben S. Bernanke und Julio J. Rotemberg, S. 231– 282. Cambridge 1997.

Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution.
The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Neoclassical Synthesis
Mause I
Karsten Mause
Christian Müller
Klaus Schubert,
Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018

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