Macroeconomics: Institutions, Instability, and the Financial System

Institutions, Instability, and the Financial System integrates the modern monetary framework—based on the 3-equation model of the demand side, the supply side, and the policy maker—with a model of the financial system. The authors address the limitations of the mainstream macroeconomic model exposed by the financial crisis and the Eurozone crisis. The text guides the reader through the three principal steps required to integrate the financial system within the macroeconomic model. Every chapter emphasizes how different actors in the economy behave, what they aim to achieve, and the constraints they face. It also covers the role of innovation rents in growth models and helps students interpret historical data, compare institutional contexts, and analyze policy debates. The book develops critical thinking skills and analytical confidence, making it essential for understanding current macroeconomic systems and financial institutions.