Literature Review of Major Schools of Macroeconomic Thought and Empirical Work

This chapter provides additional discussion of schools of macroeconomic thought, adding the neoclassical school, the New Keynesian school, and the post Keynesian school of thought to the discussion. This book would probably be best considered as a work in the post Keynesian school. The chapter briefly discusses the equation of exchange. Following this preliminary material, this chapter discusses some econometric work related to the duration of negative shocks. One related topic is whether real GDP has a unit root or whether it is trend stationary with at least one break. Critical for the current book is whether decreases in aggregate demand either (1) cause downward breaks or show up as shocks in a unit root process whose impact never completely fades, or (2) have impacts that fade away fairly quickly.