The Formalization of Macroeconomics and Its Consequences for Monetary Policy

Abstract

While early macroeconomists were engineers trying to solve practical problems, modern macroeconomists have focused on developing mathematic tools and establishing models. These analytic instruments, however, have been slow to find their way into practical applications. This paper reviews the influence of modern macroeconomics on realities of monetary policy. The author concludes that the effect of formalization of macroeconomic theory on central banking is close to zero.