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Comparative evaluation of post-Keynesian interest rate rules, income distribution and firms’ debts for macroeconomic performance

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  • Hiroshi Nishi

Abstract

This article investigates the macroeconomic effects of firms’ debts and income distribution on economic growth and inflation under three different post-Keynesian interest rate rules (the Kansas City rule, the Smithin rule, and the Pasinetti rule) by setting up a dynamic post-Keynesian model. After reviewing debates on the post-Keynesian interest rate policies, this article evaluates the relative merits of the three rules in their relationship with economic growth regimes and inflation dynamics. Accordingly, this article explicitly shows that (i) a policy rule works effectively under some economic growth and inflation patterns but not necessarily under other patterns, (ii) a policy rule contributing to high economic growth may not always be compatible with stabilisation of economic growth, and (iii) the macroeconomic effects of debt and income distribution on economic growth and inflation are closely related to the choice of interest rate rule.

Suggested Citation

  • Hiroshi Nishi, 2015. "Comparative evaluation of post-Keynesian interest rate rules, income distribution and firms’ debts for macroeconomic performance," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(1), pages 189-219.
    • Handle: RePEc:oup:cambje:v:39:y:2015:i:1:p:189-219.
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    File URL: http://hdl.handle.net/10.1093/cje/beu007
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    Cited by:

    1. Pintu Parui, 2023. "Worker household debt, functional income distribution and growth: A neo‐Kaleckian perspective," Metroeconomica, Wiley Blackwell, vol. 74(2), pages 446-476, May.
    2. Nishi, Hiroshi & Stockhammer, Engelbert, 2020. "Distribution shocks in a Kaleckian model with hysteresis and monetary policy," Economic Modelling, Elsevier, vol. 90(C), pages 465-479.

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