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Macroeconomics and natural rates: some reflections on Pasinetti’s fair rate of interest

Author

Listed:
  • Jalal Qanas

    (Assistant Professor of Economics, Qatar University)

  • Malcom Sawyer

    (Emeritus Professor of Economics, Un iversity of Leed s an d IMK Fellow)

Abstract

The paper considers some of the issues for the conduct of monetary and fiscal policy which arise in the era of financialisation. It opens with a critical assessment of the dominant approach to monetary policy, namely inflation targeting underpinned by the ‘new consensus in macroeconomics’. Within that analytical framework the role of the ‘natural rate of interest’ is critically examined. It is argued that that ‘natural rate of interest’ is a construct of a specific analytical framework and as such it lacks validity in reality in so far as that analytical framework does not provide a good approximation to that reality. This is followed by consideration of some of the issues of coordination between fiscal and monetary policies. It is argued that fiscal and monetary policies can not be separated (as is the case with the new consensus). The nature of a post-Keynesian monetary policy in the present era of financialisation, and particularly the developments of securitisation, is discussed.

Suggested Citation

  • Jalal Qanas & Malcom Sawyer, 2019. "Macroeconomics and natural rates: some reflections on Pasinetti’s fair rate of interest," Bulletin of Political Economy, Bulletin of Political Economy, vol. 13(2), pages 189-208, December.
    • Handle: RePEc:awu:journl:v:13:y:2019:i:2:p:189-208
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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