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(Post) Keynesian alternative to inflation targeting

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  • Angel Asensio

    ()
    (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII)

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    Abstract

    While the mainstream policies can not be surpassed in the enchanted ‘optimizable'world, (Post) Keynesians have to resign themselves to manage without magic wand inthe uncertain real world. The paper discusses the monetary rules proposed in the recentPost Keynesian literature. It argues that the long-term interest rate is too imperfectlycontrolled for such rules being feasible. Consequently, the quest for credibility isirrelevant, for it makes not much sense to wonder whether authorities will honour theircommitment on an unfeasible ideal target. The right question is whether authoritiespursue convincing objectives so as to move the conventional expectation of the future(and the related interest rate) towards full employment. It is a matter of confidence.The basic principles involved in such an approach to economic policy are discussed.

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    Bibliographic Info

    Paper provided by HAL in its series Post-Print with number halshs-00335560.

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    Date of creation: 04 Apr 2008
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    Publication status: Published - Presented, Inflation targeting, is there a credible alternative? Organized by the PostKeynesian Study Group, Balliol College., 2008, Oxford, United Kingdom
    Handle: RePEc:hal:journl:halshs-00335560

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00335560/en/
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    Keywords: Interest rate rule; Inflation targeting; PostKeynesian; Monetary policy;

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    1. Philip Arestis & Malcolm Sawyer, 2003. "The Case for Fiscal Policy," Economics Working Paper Archive wp_382, Levy Economics Institute.
    2. Philip Arestis & Malcolm Sawyer, 2003. "Reinventing Fiscal Policy," General Economics and Teaching, EconWPA 0306004, EconWPA.
    3. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 82(325), pages 101-15, March.
    4. Giuseppe Fontana & Alfonso Palacio- Vera, 2005. "Are Long-Run Price Stability and Short-run Output Stabilization All that Monetary Policy Can Aim For?," Macroeconomics, EconWPA 0511024, EconWPA.
    5. Paul Davidson, 2006. "Can, or should, a central bank inflation target?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 28(4), pages 689-703, July.
    6. Geoff Tily, 2006. "Keynes's theory of liquidity preference and his debt management and monetary policies," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 30(5), pages 657-670, September.
    7. John Smithin, 2007. "A real interest rate rule for monetary policy?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 30(1), pages 101-118, October.
    8. Alcino F. Câmara Neto & Matias Vernengo, 2004. "Fiscal Policy and the Washington Consensus: A Post Keynesian Perspective," Working Paper Series, Department of Economics, University of Utah, University of Utah, Department of Economics 2004_09, University of Utah, Department of Economics.
    9. Philip Arestis & Malcolm Sawyer, 2004. "On the Effectiveness of Monetary Policy and of Fiscal Policy," Review of Social Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 62(4), pages 441-463.
    10. Gilberto Tadeu Lima & Mark Setterfield, 2007. "Inflation Targeting And Macroeconomic Stability In A Post Keynesian Economy," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Gr 174, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    11. Jean-Pascal Bénassy, 2006. "IS-LM and the multiplier: A dynamic general equilibrium model," PSE Working Papers halshs-00590513, HAL.
    12. Thomas I. Palley, . "The Role of Institutions and Policies in Creating High European Unemployment: The Evidence," Economics Working Paper Archive wp_336, Levy Economics Institute.
    13. Angel Asensio, 2006. "New-Consensus Macroeconomic Governance in a Keynesian world, and the Keynesian alternative," Post-Print, HAL halshs-00139113, HAL.
    14. Thomas I. Palley, 2007. "Macroeconomics and monetary policy: competing theoretical frameworks," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 30(1), pages 61-78, October.
    15. Eckhard Hein & Engelbert Stockhammer, 2010. "Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model," Review of Political Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 22(3), pages 317-354.
    16. H. Sonmez Atesoglu, 2007. "The neutral rate of interest and a new monetary policy rule," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 29(4), pages 689-697, July.
    17. Louis-Philippe Rochon & Mark Setterfield, 2007. "Interest rates, income distribution, and monetary policy dominance: Post Keynesians and the "fair rate" of interest," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 30(1), pages 13-42, October.
    18. Mark Setterfield, 2007. "Is There a Stabilizing Role for Fiscal Policy in the New Consensus?," Review of Political Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 19(3), pages 405-418.
    19. Dixit, Avinash & Lambertini, Luisa, 2003. "Symbiosis of monetary and fiscal policies in a monetary union," Journal of International Economics, Elsevier, Elsevier, vol. 60(2), pages 235-247, August.
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