Oxford Review of Economic Policy volume 16, issue 4, P33-42 2000 DOI: 10.1093/oxrep/16.4.33 View full text
P Krugman

Abstract: Simple macroeconomic models based on IS-LM have become unfashionable because of their lack of microfoundations, and are in danger of being effectively forgotten by the profession. Yet while thinking about micro-foundations is a productive enterprise, complex models based on such foundations are not necessarily more accurate than simple, ad-hoc models. Three decades of attempts to base aggregate supply on rational behaviour have not displaced the Phillips curve; inter-temporal models of consumption do not offer…

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