A Post Keynesian view of central bank independence, policy targets, and the rules versus discretion debate
AbstractThis paper addresses three monetary policy issuesâpolicy independence, choice of targets, and rules versus discretion. According to the new monetary consensus, the central bank needs policy independence to build credibility, the operating target is the overnight interbank lending rate, and the ultimate goal is price stability. An alternative view is presented, arguing that an effective central bank cannot be independent as conventionally defined, where effectiveness is indicated by the ability to hit an overnight nominal interest rate target. Discretionary policy and conventional views of central bank ability to achieve traditional goals such as robust growth, low inflation, or high employment are rejected. Thus, the paper returns to Keynes's call for low interest rates and euthanasia of the rentier.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.
Volume (Year): 30 (2007)
Issue (Month): 1 (October)
Contact details of provider:
Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348
central bank independence; Keynes; monetary policy targets; Post Keynesian theory; rules versus discretion;
Other versions of this item:
- L. Randall Wray, 2007. "A Post-Keynesian View of Central Bank Independence, Policy Targets, and the Rules-versus-Discretion Debate," Economics Working Paper Archive wp_510, Levy Economics Institute.
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- Hiroshi Nishi, 2012. "Varieties of Economic Growth Regimes, Types of Macroeconomic Policies, and Policy Regime: A Post-Keynesian Analysis," Discussion papers e-12-008, Graduate School of Economics Project Center, Kyoto University.
- Jairo Parada Corrales & Cristina Albor Cepeda, 2011. "La mitología del banco central independiente," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, Universidad Externado de Colombia - Facultad de Economía, vol. 13(24), pages 465-472, January-J.
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