Macroeconomics: Institutions, Instability and Inequality (2024)

Macroeconomics: Institutions, Instability and Inequality (OUP, 2024) 

Wendy Carlin and David Soskice

As a student or instructor, you can read or download a free PDF of the final publication here. This PDF version of the book lacks the interactive features of the e-book available from the websites (by region) below and is made available free of charge for individual use under a CC-BY-NC-ND license.  

For inspection copies and purchase of hard copies with the interactive ebook, go to

UK: https://global.oup.com/ukhe/product/macroeconomics-9780198838661?q=carlin&cc=gb&lang=en

USA: https://global.oup.com/ushe/product/macroeconomics-9780198838661?q=carlin&cc=gb&lang=en

Australia and NZ: https://www.oup.com.au/books/higher-education/management-and-marketing/9780198838661-macroeconomics-institutions,-instability,-and-inequality

Canada: https://www.oupcanada.com/catalog/9780198838661.html

For download, the simulator in Excel, which allows interactive analysis of a wide range of shocks and policy responses (including impulse-response functions) for closed and open economy cases.

• Introduction to the simulator

• Simulator (for download) Don't try to run this online. To use it as a simulator for your own experiments, you need to download the file and run it in Excel. But before it will work, you need to unblock the macros in this single file. 

  • Windows: To do that, Open the File Explorer and go to the folder where you saved the file; Right-click and choose Properties; At the bottom of the General tab, select the Unblock checkbox and select OK. When you open the file, you will see the front cover of the book and you are ready to begin. 

  • Mac: First, you will have to open Excel. Then, you have to go to the "Preferences" tab on the top-right corner of your screen. Then, under "Sharing and Preferences", you will see "Security" - click on that. This will open a new sub-tab with 3 sections, the relevant one of which is "Macro Security". Ensure that you have the "Disable all macros with notification" option toggled. This will ensure that when you open the simulator, you will be welcomed with a pop-up message which asks you whether you wish to enable macros for this file specifically, which you must agree to. 

Reviews of Carlin and Soskice 2024

“This enlightening book is a wonderful guide to the key topics of macroeconomics: inflation, monetary policy, including at the zero lower bound, growth and innovation, inequality, exchange rates and more. Very closely connected to the real world, Carlin and Soskice’s book brings a wealth of data and historical examples into the discussion in a very pedagogical way. It covers extremely well the links between risk taking, financial cycles and crises which are at the heart of our modern economies. It has also an essential and very timely chapter on commodity price shocks. This is what macroeconomics is about: first order questions, affecting the lives of billions of people, clear modelling and rigorous thinking informed by data and history. Very exciting!”   Hélène Rey, Professor of Economics, London Business School

“This wonderful textbook achieves a rare feat: the material is consistent with work at the current research frontier but nevertheless remains highly accessible. I first learned macroeconomics from an earlier volume of this textbook, when I was an undergraduate student twenty years ago. Now as then the core of the book is its simple 3-equation model for studying business cycles and stabilization policy. But this latest volume also takes on board many of the key developments over the last two decades. Specifically, this is the first textbook to integrate the lessons of the exploding literature on heterogeneous-agent macroeconomics and of the new HANK models. As Carlin and Soskice write: “it’s time for ‘inequality’ to have a place in the title of a macroeconomics textbook” – I couldn’t agree more!”  Benjamin Moll, Professor of Economics, London School of Economics 

“Beautifully written and rich in data and historical examples, “Macroeconomics” sets out the building blocks of macroeconomic modelling and guides readers to the frontier of the discipline. The book underscores the crucial role played by institutions, inequality and innovation in contemporary economies. Once you start reading it, you cannot stop it!”  Silvana Tenreyro, Professor of Economics, Department of Economics, London School of Economics and External Member of the Monetary Policy Committee, Bank of England.  

“Carlin and Soskice have written a masterful treatise on modern macroeconomics. The authors bring to life the fundamental importance of balance for the healthy functioning of an economy – not only the balance between supply and demand, but also in terms of equitable distribution of income. They carefully walk us through when finance is useful, and when its excesses can be harmful for the economy. Most importantly, the authors explain why institutions, i.e., the way a society chooses to govern itself, are central to how far an economy prospers”.  Atif Mian, Professor of Economics, Princeton University, Co-author of ‘House of Debt’ (2014, The University of Chicago Press) 

“Wendy Carlin and David Soskice have once more achieved a pedagogical tour de force, bringing frontier research to the undergraduate level.  The increased focus on inequality, its sources and its implications, is a particularly welcome addition.“   Olivier Blanchard, formerly Chief Economist, IMF, Professor of Economics, MIT, Senior Fellow, Peterson Institute 

“This remarkable new macroeconomics text brings upper-level undergraduates to the frontier of research and policy. The exposition is at the same time accessible, engaging, and relevant to current concerns about the broad consequences of policies – intended and unintended.  The book's attention to historical and institutional context, as well as its treatment of innovation and technical change, set it apart.”  Maurice Obstfeld, Professor of Economics, University of California Berkeley, Co-author of ‘Foundations of International Macroeconomics’ (1996, MIT Press)

“Austerity, financial crises, quantitative easing, artificial intelligence: this book has it all.  A macroeconomics text that explains the data and logic that policymakers really do use. Read this book and understand the world.” Jonathan Haskel, Professor of Economics, Imperial College London and External Member of the Bank of England’s Monetary Policy Committee 

“This is the only undergraduate macroeconomics textbook that weaves a serious treatment of inequality into a core three-equation model, and, at the same time, it also includes an unparalleled introduction to incorporating the financial system in this framework. As such, it marks a serious departure from most macroeconomics textbooks, which tend to relegate distribution and finance to the secondary status of extensions or special topics. The accompanying simulation tool also makes the book exceptionally classroom friendly, not only by providing instructors a visual way to summarize comparative statics, but also by giving students a tool with which they can independently explore extensions of classroom discussions.” Leila E. Davis, Associate Professor of Economics, University of Massachusetts Boston 

“Economics students want to understand the world we live in, and no other macroeconomics textbook satisfies this desire to engage with the world's most significant issues quite like Carlin and Soskice. With its intuitive, tractable, and realistic approach, their textbook equips students to easily comprehend even the most complex macroeconomic concepts and their relationship to real-world problems like inequality and economic shocks. The 3-equation model helps students grasp how economic shocks affect the economy, while the new book's analysis of inequality gives a more thorough understanding of how policy responses can impact people's lives. The book equips the next generation of economics graduates to make a meaningful impact in the world. 

“The new book also links to the CORE Econ Project, enabling programme leaders to create a more integrated curriculum in macroeconomics across years.” Stefania Paredes Fuentes, Associate Professor, University of Warwick   

“The coverage on environmental and social sustainability of production is much appreciated.” Christina Wolf, Senior Lecturer in Economics, University of Hertfordshire 

“Employers value graduates comfortable to deal with real world issues, using appropriate theory and data skills. Using this textbook will be an ideal way to foster such a graduate.” Marco Gundermann, Head of Economics, International Relations and Development, University of Northampton 

“Carlin and Soskice offer a clear, balanced, engaging, and forward-looking perspective on a wide range of topics, from short-term monetary policy to growth & innovation. Students will appreciate the authors’ crystal-clear exposition, along with the careful balance of technical detail and intuitive real-world examples presented.” Ceri Davies, Associate Professor in Economics, University of Birmingham 

“The book's development and applications of the 3-equation model make it easy to introduce students to more advanced theoretical ideas and current policy issues. It is straightforward to pick chunks of the book and incorporate other material. Resources provided to instructors and students are very helpful.” Jennifer Smith, Associate Professor of Economics, University of Warwick 

Reviews of Carlin and Soskice, 2015

‘This illuminating book introduces the reader to macroeconomics in a revolutionary fashion: namely, by means of very elegant and accessible models that are always based on sound microfoundations and developed against the background of a narrative of the evolution of the performance and policy regimes of the advanced economies over the post war period. Unlike most other macro textbooks, this book builds on the most recent research and debates to teach macroeconomics the way it should now be taught: namely, by emphasizing the interplay between macro and finance; by linking growth to innovation, market structure and firm dynamics; and more generally by taking institutions seriously into account when looking at growth, business cycles, and unemployment and the interplay between them. This book is an absolute must-read for students and policy makers, even those with little initial background, who need to be fully acquainted with modern macroeconomics.’  (Philippe Aghion, Professor of Economics, Harvard University)

'Carlin and Soskice have produced a gem of a book. The teaching of macroeconomics after the crisis has changed surprisingly little, limiting itself to incorporating 'frictions' into otherwise standard models that failed during the crisis. Carlin and Soskice embark on a much more ambitious venture. They show how the financial cycle and macroeconomics are inextricably linked, with the risk-taking channel as the linchpin. Their exposition is refreshingly original and yet lucid and accessible. This book will appeal to serious students of economics and to all inquiring minds who have wondered about the role of the financial cycle in macroeconomics. ' (Hyun Song Shin, Economic Adviser and Head of Research , Bank of International Settlements, and Professor of Economics, Princeton University )

‘To be relevant, economics needs to help society understand those phenomena which do it greatest harm – unemployment, inflation and deflation, financial instability, fiscal and banking crisis. Pre-crisis, mainstream economic models failed that societal test and therefore failed society. Wendy Carlin and David Soskice’s important new book is the first step towards redemption, providing students and scholars with a rigorous but accessible framework for understanding what troubles society most.’ (Andy Haldane, Chief Economist, Bank of England)

‘This is an exciting new textbook. It offers a clear and cogent framework for understanding not only the traditional macroeconomic issues of business cycles, inflation and growth, but also the financial crisis and ensuing Great Recession that have recently shaken the world economy. The paradigm it offers is highly accessible to undergraduates. Yet at the same time it is consistent with what goes on at the frontiers of the field. Overall, the book confirms my belief that macroeconomics is alive and well!’ (Mark Gertler, Professor of Economics, New York University)

‘The Carlin and Soskice book does a wonderful job of covering the economics behind macroeconomics and the financial system, alongside presenting the latest research on this and the drivers of the great recession. It also has an impressive array of data and examples woven in with theory explained in a beautifully intuitive way. For any student interested in a refreshingly modern take on the financial crisis and the economics that underlie this, this book is invaluable.’ (Nick Bloom, Professor of Economics, Stanford University)

'This is, I believe, the first macro-economic textbook effectively to incorporate the lessons of the Great Financial Crisis and to describe how financial frictions can impact the macro-economy. The authors weave together the old mainstream, three-equation, model with the newer account of potential financial disturbances in a lucid and efficient manner. As such, it has a major advantage over almost all other extant textbooks, and will be a boon not only for undergraduates, but also for graduates and those wishing to understand the current working of our macro-economic system, beset as it has been with financial strains. ' (Professor Charles Goodhart, Director of the Financial Regulation Research Programme, The London School of Economics and Political Science )

‘One of the first macro textbooks to integrate the lessons of the crisis.   An elegant bridge between introductory undergraduate and graduate macro texts.’ (Olivier Blanchard, Chief Economist, IMF and Professor of Economics, MIT)  

'In the light of the events of the past decade, it is important that a new macroeconomics text attempts to satisfy the demands of those learning and using macroeconomics to be able to access relatively simple models which reflect the ways in which the financial sector interacts with the real economy. This is by no means an easy task. The new Carlin and Soskice book represents a significant step forward in this regard. Consequently undergraduates, post-graduates and their teachers should be grateful that they can now access teaching materials which have something useful to say about the financial crisis.' (Professor Stephen Nickell, Nuffield College, Oxford )