Critique of the New Consensus Macroeconomics and Implications for India

Abstract

After travelling a long way, different schools of economic thought rerached a new consensus on macroeconomics during last two decades of the twentieth century. Before the global financial crisis (GFC), many advanced and developing economies were pusrsuing public policies based on the new consensus macroeconomics (NCM). Its major policy recommendations include: (a) inflation targeting, (b) setting of policy rate based on Taylor rule, (c) non-intervention in the asset market (popularly known as Jackson Hole consensus), (d) light-touch regulation of the non-bank sagment, and e) ability of financial markets to regulate themselves (market discipline).