Macroeconomic modeling, economic policy, and methodology: Economics at the edgeBy Mikael RandrupByrialsen, Hamid Raza, and FinnOlesen (Eds.), New York: Routledge Publishing. 2022. pp. 256. Hardback $160.00. ISBN 978‐1032182117

Criticism of mainstream modern macroeconomics after the Great Recession underlies the emergence of alternative approaches to macroeconomic modeling, economic policy, and methodology. These alternative approaches stem from the perspective of heterodox economic thinking. This edited volume offers a fresh viewpoint on the problem of macroeconomic modeling issues, particularly from the perspective of heterodox economic thought. In 256 pages, Mikael R. Byrialsen, Hamid Raza, and Finn Olesen, academics from The Aalborg University Business School (AAUBS), skillfully present alternative macroeconomic modeling, economic policies, and methodologies from the perspective of heterodox economic thinking. It advocates for more substantial ethical considerations in macroeconomics and adopts pluralistic strategies to ensure that macroeconomic theory can adapt to real-world problems. In addition, the authors highlight recent trends in empirical stock-flow consistent models and macroeconomic policy issues that mainstream economists largely neglect; the trends include financial (in)stability and macro-imbalances. The edited volume's focus is inconsistent, according to the editor, because it incorporates a lot of concepts from macroeconomic modeling, economic policies, and methodologies from the perspective of heterodox economic thinking. Nevertheless, it can facilitate the coexistence of different and contradictory ideas and conceptions, thus enabling readers to gain a comprehensive understanding of these conflicts and impartial recognition of the complexities associated with macroeconomic modeling, economic strategies, and methodology. Readers have the opportunity to formulate an appropriate approach for themselves through a comprehensive analysis of the critical areas of consensus and divergence found within the current body of research on macroeconomic modeling, economic policies, and methodology. Methodological issues are given priority in the edited volume. The first chapter examines the relationship between economics and ideology. This chapter also examines the role of pluralism in economics and the need for transparency about the paradigmatic basis of economic findings. In the second chapter, it is stated that as a social science, economics must be practiced pluralistically, with multiple paradigms competing over the best interpretation of economic reality. Also, transparency about the paradigmatic basis of economic findings is necessary to avoid ideological distortion. However, the pluralist approach does not present any empirical results or data. Moreover, the pluralist approach focuses primarily on the state of economics in Germany and may not be generalizable to other countries or regions. Finally, the approach does not provide a comprehensive analysis of all possible economic paradigms but focuses on the dominant paradigm in contemporary economics. The criticisms of the modern macroeconomic mainstream, namely the new neoclassical synthesis (NNS), have insufficient theoretical relevance and fail to match real-life empirical evidence. Macroeconomic systems cannot be characterized as closed systems as mainstream economists usually do. Moreover, ethical considerations are always present to some degree in macroeconomics. This study suggests that economists should not ignore the normative dimension of economics and thus consider some of the ethical implications when making policy recommendations. However, this study has some limitations in terms of empirical and practical implications. First, the study does not provide any empirical evidence to support its arguments. Second, the study neither discusses the practical implications nor considers ethical considerations as applied to macroeconomics. Third, the study does not comprehensively analyze the ethical implications of macroeconomic policies because it only focuses on theoretical and conceptual analysis of the normative dimension of macroeconomics. Fourth, the study does not address the potential trade-offs between economic efficiency and ethical considerations in macroeconomics. The second part highlights recent trends in empirical Stock-Flow Consistent (SCF) models by collecting a group of the most well-developed empirical models from five different economic analyses: the Danish, the Dutch, the French, the Italian, and the Argentinian models. SFC models are macroeconomic models based on a rigorous accounting framework, which guarantees a correct and comprehensive integration of all the flows and stocks of an economy. This development aims to address the need for rigorous and realistic quantitative models to track the future paths and dynamics of variables of interest and evaluate the effects of specific policies or external shocks. This model overcomes the missing links between the real and financial sectors by setting up the accounting structure of the sectoral transactions, describing the transaction matrix and balance sheet matrix, and presenting the main stochastic equations and channels of transmission in the model. The authors argue that their model provides a more accurate representation of the real economy and financial system than traditional models. However, the proposed policy simulation results neither accurately reflect the real-world situation, as the data used is limited, nor represent the entire decade. In addition, the model developed does not consider political and social factors and does not consider the potential impact of external shocks on the proposed policy mix. The final part explores macroeconomic policy issues that mainstream economists have largely ignored. These issues include financial (in)stability and macro-imbalances. Chapter 11 presents a model discussing the accumulation of official foreign exchange reserves and shifting their role from passive to active and strategic. This model highlights the dynamic differences in the short-term and long-term and suggests room to lead an autonomous interest rate policy in a fixed peg context, even without capital controls, as long as foreign exchange reserves are sufficient. However, the developed model has not considered the potential benefits or other costs of accumulating foreign exchange reserves. This model only focuses on the role of foreign exchange to increase monetary policy autonomy. For people who are interested in macroeconomic modeling, particularly from the perspective of heterodox economic thought, this edited volume is generally insightful. Theoretical talks, macroeconomic methodology issues, and case studies using real data from the countries Denmark, the Netherlands, France, Italy, and Argentina are introduced thoroughly. Yet, it does not provide a unified framework for heterodox macroeconomic modeling and policy analysis, which policymakers can use. Although this edited volume explains the concepts, claims, points of agreement, and points of controversy regarding heterodox macroeconomic modeling, it does not seek to establish a consensus on the subject. However, researchers, graduates, or advanced students interested in alternative macroeconomic modeling, economic policy, and methodology may find this edited volume useful. The authors would like to express their deepest gratitude to Lembaga Pengelolaan Dana Pendidikan (LPDP/Indonesia Endowment Fund for Education) under the Ministry of Finance of the Republic of Indonesia as the sponsor for our doctoral studies and the support of this publication.