Modern macroeconomics failed to take into account defaults: BoJ paper

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A Bank of Japan paper published on Tuesday and co-authored by Charles Goodhart, professor emeritus at the London School of Economics, says the failure to incorporate the possibility of default is one of modern macroeconomic theory's main limitations.

Goodhart and Dimitrios Tsomocos, the paper's authors, build on a lecture delivered by Bill White, a former Bank of Canada deputy governor, in 2010 that highlighted many of the deficiencies in modern macroeconomic theory. White argued that a new

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