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Inflation targeting and Keynes's political economy

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  • George Argitis

Abstract

This paper argues that inflation targeting, in the manner proposed by the "new consensus" in macroeconomics, is not a socially desirable monetary policy strategy and is not compatible with Keynes's political economy. Inflation targeting is likely to cause distributional changes that benefit rentiers, which, in turn, might operate as a source of deficient demand, unemployment, and low growth rates of gross domestic product. The econometric analysis that appears in this paper uses panel data for a sample of 13 Organization for Economic Cooperation and Development countries and assesses the relevance of some of Keynes's monetary hypotheses. The findings provide support that rentiers' income influences negatively both the aggregate demand growth and the unemployment rate.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

Volume (Year): 31 (2008)
Issue (Month): 2 (December)
Pages: 249-270

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Handle: RePEc:mes:postke:v:31:y:2008:i:2:p:249-270

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

Related research

Keywords: aggregate demand; income distribution; inflation targeting; Keynes's political economy; monetary policy; unemployment;

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Cited by:
  1. Cordelius Ilgmann & Martin Menner, 2011. "Negative nominal interest rates: history and current proposals," International Economics and Economic Policy, Springer, vol. 8(4), pages 383-405, December.
  2. Hein, Eckhard & Schoder, Christian, 2009. "Interest rates, distribution and capital accumulation – A Post-Kaleckian perspective on the US and Germany," MPRA Paper 18223, University Library of Munich, Germany.
  3. Carlos A. Carrasco & Jesus Ferreiro, 2013. "Inflation targeting in Mexico," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 35(3), pages 341-372, April.
  4. Ilgmann, Cordelius, 2011. "Silvio Gesell: 'a strange, unduly neglected' monetary theorist," CAWM Discussion Papers 23, Center of Applied Economic Research Münster (CAWM), University of Münster.
  5. Emiliano Brancaccio & Giuseppe Fontana, 2013. "'Solvency rule' versus 'Taylor rule': an alternative interpretation of the relation between monetary policy and the economic crisis," Cambridge Journal of Economics, Oxford University Press, vol. 37(1), pages 17-33.
  6. Argitis, Georgios & Michopoulou, Stella, 2010. "Monetary Policy, Interest Payments, Income Distribution and the Macroeconomy," Review of Applied Economics, Review of Applied Economics, vol. 6(1-2).

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