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The Post Keynesian alternative to inflation targeting

Author

Listed:
  • Angel Asensio

    (CEPN, University of Paris 13.)

  • Mark (M.G.) Hayes

    (Homerton College, Cambridge.)

Abstract

While mainstream policies may be beyond improvement in the enchanted ›optimizable‹ world, Post Keynesians have to manage without a magic wand in our uncertain world. We discuss the alternative policies proposed in the recent Post Keynesian literature and argue that control of interest rates is too imperfect for such policies to be feasible in general, although they provide useful guidelines and may be successful in favourable circumstances. Consequently, the question of credibility is irrelevant, if this means whether policy-makers will honour their commitment to an unfeasible ideal target. The right question is whether policy is convincing enough to make the conventional state of expectation (and the related interest rate) consistent with full employment. It is all a matter of confidence. The basic principles involved in such an approach to monetary policy are discussed.

Suggested Citation

  • Angel Asensio & Mark (M.G.) Hayes, 2009. "The Post Keynesian alternative to inflation targeting," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 6(1), pages 65-79.
  • Handle: RePEc:elg:ejeepi:v:6:y:2009:i:1:p:65-79
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    Cited by:

    1. Eckhard Hein & Christian Schoder, 2011. "Interest rates, distribution and capital accumulation -- A post-Kaleckian perspective on the US and Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(6), pages 693-723, November.
    2. Giorgos Argitis, 2011. "A view on post-Keynesian interest rate policy," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 8(1), pages 91-112.

    More about this item

    Keywords

    interest rate rule; convention; uncertainty; monetary policy;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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