The roles of ideology, institutions, politics, and economic knowledge in forecasting macroeconomic developments : lessons from the crisis ; what's wrong with modern macroeconomics?

This article discusses the importance of ideology, institutions, politics, and economic knowledge for forecasting economic policies and their impact on macroeconomic developments. Following a general discussion of those factors, the article illustrates their forecasting usefulness by drawing on experiences from the global financial crisis. Specific issues include the roles of those factors in the pre-crisis bubble buildup, in shaping aggregate policy responses in the USA and Europe and in shaping international coordination regarding long-term regulatory reform and preservation of free trade. A final illustration includes the role of policymaking institutions in guiding public expectations.