Macroeconomics

Macroeconomics addresses the performance, structure, behavior, and decision-making of an economy as a whole. This entails studying economy-wide phenomena such as output, unemployment, national income, inflation, economic growth, and how they interact in aggregate economies.

Additionally, Macroeconomics involves people making decisions based upon what they think will happen, and what will happen depends on what decisions people make. Consequently, the concept of equilibrium must be dynamic. Solving equilibrium often requires sophisticated techniques. Bulk of macroeconomic theorizing develops methods to achieve this. Much of the research is quantitative and empirical in trying to quantify the aggregate outcome economic policies using economic models as laboratories.

Most of the contemporary macroeconomics research is policy driven. Fiscal policy is the use of government’s expenditures, taxes and debt as instruments to influence the aggregate outcome of an economy. Finding the right balance between policy measures and intertemporal budget constraints is often the main question. Inflation is the outcome of the monetary policy. Inflation interacts with real economy and this trade-off is at the core of research on monetary policy. Financial crisis has put the macroprudential policy high on the research macroeconomics research agenda. Macroprudential policy aims safeguarding the financial system as a whole. Key research question is how financial systems interact with real economy and what are suitable policy tools for safeguarding the system.