Inflation targeting and macroeconomic stability in a Post Keynesian economy
This paper examines the compatibility of inflation targeting with an economy that is Post Keynesian in character. We show that in a Post Keynesian environment, policymakers can both set and achieve an inflation target without adverse consequences for the real economy, as long as an appropriate policy mix is chosen. The latitude that policymakers have in making this choice is investigated. One of our key results is that orthodox policy regimes do not provide appropriate policy mixes. Indeed, the more orthodox the policy regime becomes, the less viable is inflation targeting in a Post Keynesian economy.
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Volume (Year): 30 (2008)
Issue (Month): 3 (April)
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Other versions of this item:
- 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] 174, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- Mark Setterfield, 2015. "Won’t Get Fooled Again – Or Will We? Monetary Policy, Model Uncertainty, and ‘Policy Model Complacency’," Working Papers 1516, New School for Social Research, Department of Economics, revised Jan 2016.
- Eduardo Drumond & Gabriel Porcile, 2010. "Um Modelo Dinâmico de Macroeconomia Aberta com Metas de Inflação, “Conflito Distributivo” e Equilíbrio na Conta Corrente," Working Papers 0109, Universidade Federal do Paraná, Department of Economics.
- JesÃºs Ferreiro & Carmen GÃ³mez, 2014. "Implementing a Voluntary Wage Policy: Lessons from the Irish and Spanish Wages Policies before the Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(1), pages 107-127, Februar.
- Angel Asensio, 2012. "Between the Cup and the Lip: On Post Keynesian Interest Rate Rules and Long-term Interest Rate Management," Chapters, in: Monetary Policy and Central Banking, chapter 1 Edward Elgar Publishing.
- Mark Setterfield, 2014.
"Using Interest Rates as the Instrument of Monetary Policy: Beware Real effects, Positive Feedbacks, and Discontinuities,"
Central Bank of Argentina, Economic Research Department, vol. 1(70), pages 7-22, June.
- Mark Setterfield, 2013. "Using Interest Rates as the Instrument of Monetary Policy: Beware Real effects, Positive Feedbacks, and Discontinuities," Working Papers 1320, Trinity College, Department of Economics.
- Peter Skott, 2012. "Theoretical And Empirical Shortcomings Of The Kaleckian Investment Function," Metroeconomica, Wiley Blackwell, vol. 63(1), pages 109-138, 02.
- Peter Skott, 2008. "Theoretical and empirical shortcomings of the Kaleckian investment function," UMASS Amherst Economics Working Papers 2008-11, University of Massachusetts Amherst, Department of Economics, revised Dec 2009.
- Yun K. Kim & Mark Setterfield & Yuan Mei, 2014. "A theory of aggregate consumption," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(1), pages 31-49, April.
- Yun Kim & Mark Setterfield & Yuan Mei, 2013. "A Theory of Aggregate Consumption," Working Papers 1301, Trinity College, Department of Economics.
- 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.
- Hein, Eckhard & Schoder, Christian, 2009. "Interest rates, distribution and capital accumulation: A Post-Kaleckian perspective on the US and Germany," IPE Working Papers 04/2009, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
- 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.
- Leonardo Vera, 2014. "The Simple Post-Keynesian Monetary Policy Model: An Open Economy Approach," Review of Political Economy, Taylor & Francis Journals, vol. 26(4), pages 526-548, October.
- Porcile, Gabriel & de Souza, Alexandre Gomes & Viana, Ricardo, 2011. "External debt sustainability and policy rules in a small globalized economy," Structural Change and Economic Dynamics, Elsevier, vol. 22(3), pages 269-276, September.
- Angel Asensio, 2008. "(Post) Keynesian alternative to inflation targeting," Post-Print halshs-00335560, HAL.
- 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.
- Peter Skott, 2010. "Growth, Instability and Cycles: Harrodian and Kaleckian Models of Accumulation and Income Distribution," Chapters, in: Handbook of Alternative Theories of Economic Growth, chapter 5 Edward Elgar Publishing.
- Peter Skott, 2008. "Growth, instability and cycles: Harrodian and Kaleckian models of accumulation and income distribution," UMASS Amherst Economics Working Papers 2008-12, University of Massachusetts Amherst, Department of Economics.
- Yun K. Kim & Mark Setterfield & Yuan Mei, 2015. "Aggregate consumption and debt accumulation: an empirical examination of US household behaviour," Cambridge Journal of Economics, Oxford University Press, vol. 39(1), pages 93-112.
- Yun Kim & Mark Setterfield & Yuan Mei, 2012. "Aggregate Consumption and Debt Accumulation: An Empirical Examination of US Household Behavior," Working Papers 1204, Trinity College, Department of Economics.
- Rafael Saulo Marques Ribeiro & John S. L. McCombie, Gilberto Tadeu Lima, 2016. "A Reconciliation Proposal of Demand-driven Growth Models in Open Economies," Working Papers, Department of Economics 2016_01, University of São Paulo (FEA-USP).
- Mark Setterfield & Kurt von Seekamm, 2012. "Stabilization Policy with an Endogenous Commercial Bank," Chapters, in: Monetary Policy and Central Banking, chapter 2 Edward Elgar Publishing.
- Gilberto Tadeu Lima & Mark Setterfield, Jaylson Jair da Silveira, 2013. "Inflation Targeting and Macroeconomic Stability with Heterogeneous Inflation Expectations," Working Papers, Department of Economics 2013_11, University of São Paulo (FEA-USP), revised 25 Nov 2016.
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