Date of Award


Document Type

Masters Thesis

Degree Name


Organizational Unit

College of Arts Humanities and Social Sciences

First Advisor

Yavuz Yasar, Ph.D.

Second Advisor

Peter Sai-Win Ho

Third Advisor

Katherine Freeman

Fourth Advisor

Brian Kiteley


Economic methodology, History of economic thought, Macroeconomics, Monetary policy, The Great Recession, The Subprime Crisis


Unlike microeconomics where there are relatively few disagreements, the field of macroeconomics has always been the arena of several competing theories. Despite that history of conflict, in the late 1980s during the Great Moderation, the New Classicals and the New Keynesians reached an agreement, known as the New Consensus during the Great Moderation. For decades, the New Consensus has dominated macroeconomic theory and policymaking not only in the U.S., but also throughout the world. After many years of calm, however, the 2007-2008 subprime mortgage crisis and its consequent Great Recession demonstrated that how fragile that consensus was.

While the debate regarding the collapse of the consensus still continues, this thesis aims to understand the implications of the collapse in terms of the future of macroeconomic theory and of policy-making from a critical and historical perspective. To achieve this goal, this thesis will explore the rise and the fall of the New Consensus Theory by first showing, the process that successfully incorporated the once opposing ideologies into one system; second, this paper will study the collapse of the consensus soon after the arrival of the Great Recession. This is followed by a section that aims to draw some lessons learned from the failure of the New Consensus Theory. Finally, the thesis examines the problems associated with policy-making, deficiencies in economic theory and modeling, and the appropriateness of the methodology in the foundations of the New Consensus. Based on these critical and historical evaluations, the thesis concludes with some remarks concerning the future of macroeconomic theory and policy-making.

Publication Statement

Copyright is held by the author. User is responsible for all copyright compliance.

Rights Holder

Hailiang Xu


Received from ProQuest

File Format




File Size

110 p.


Economics, Economic history, Economic theory