New directions

Abstract

In this short chapter, we refer to the recent development of macroeconomic models with equilibrium indeterminacy. The global financial crisis of 2007–2008 forced macroeconomists to rethink about their analytical frameworks. The mainstream dynamic stochastic general equilibrium (DSGE) approach was severely criticized by practitioners and policy makers because it failed to offer useful policy recommendations for the financial crisis as well as for the prolonged slumps in many countries after the crisis. In the search for new directions in macroeconomic analysis, there is renewed interest in macroeconomic models with equilibrium indeterminacy. In what follows, we pick out a notable sample of the recent studies in the field.