What have central bankers learned from modern macroeconomic theory?

► Modern macroeconomic theory has fallen behind the practice of central banking. ► The practice of inflation targeting did not arise from the literature on time inconsistency. ► Modern macro does not capture the role of central banks in promoting financial stability. ► The shortcomings of modern macro result from its preoccupation with states of equilibrium. ► Agent-based computational economics can overcome some of these shortcomings.