Macroeconomic behavior varies according to the character of the policy regime. There is therefore no truly ‘general’ theory which will apply at all times and in all places. Over the past hundred years, one model may be appropriate to the period of the gold standard, another to the interwar years, another to the so-called ‘Golden Age’ after the Second World War, and so on. Expectations, which depend on confidence in the regime, determine the stability of both prices and output. Institutions also adapt in ways that may support, or ultimately undermine, the foundations of the policy regime.
