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This book discusses the shortcomings of the standard macroeconomic model (SMM). The SMM failed to explain the real world and anticipate the global financial crises. The main reason for these failures was the lack, in the SMM, of any role of money and the way the financial sector works.

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The 2007 financial crisis and the Great Recession have prompted a debate about the state of macroeconomics, and many orthodox economists have argued that macroeconomics has entered a Dark Age.

This book discusses the shortcomings of the standard macroeconomic model (SMM). The SMM failed to explain the real world and anticipate the global financial crises. The main reasons for this failure have been attributed to its inability to assign an active role of money and by the absence of appropriate modelling of financial markets.

The book also discusses how the SMM can be reformed to better account for the real world and policy prescriptions, such as the Chicago Plan, that can reduce the risks emanating from excessive money creation by banks.

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Standard macroeconomic model - Financial crises - Velocity of money - Quantity theory of money - System dynamic approach - Intermediation loanable funds theory - Fractional reserve banking - Balance sheet recession - Endogenous money view - Debt money - Chicago Plan

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Syed F. Mahmud is a professor of economics at Bilkent University. He holds a Ph.D. degree in economics from McMaster University (Canada). In recent years, his research has been primarily focused on banking and finance.

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