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The New Consensus and Post-Keynesian Interest Rate Policy

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  • Claude Gnos
  • Louis-Philippe Rochon

Abstract

This paper outlines the fundamental arguments of the New Consensus, critiques it from a Post-Keynesian perspective, and offers a Post-Keynesian alternative to the Taylor Rule. While Post-Keynesian economics provides a theory of endogenous money with exogenous interest rates, it has no clear description of a central bank reaction function. We attempt to remedy this oversight by identifying some of the difficulties attached to developing a Post-Keynesian reaction function, and suggesting an approach to the setting of interest rates that is more consistent than the Taylor Rule with Keynes's General Theory.

Suggested Citation

  • Claude Gnos & Louis-Philippe Rochon, 2007. "The New Consensus and Post-Keynesian Interest Rate Policy," Review of Political Economy, Taylor & Francis Journals, vol. 19(3), pages 369-386.
    • Handle: RePEc:taf:revpoe:v:19:y:2007:i:3:p:369-386
    DOI: 10.1080/09538250701453071
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    References listed on IDEAS

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    1. Mark Setterfield (ed.), 2002. "The Economics of Demand-Led Growth," Books, Edward Elgar Publishing, number 1864.
    2. Marc Lavoie & Mario Seccareccia (ed.), 2004. "Central Banking in the Modern World," Books, Edward Elgar Publishing, number 3297.
    3. John Smithin, 1994. "Controversies In Monetary Economics," Books, Edward Elgar Publishing, number 412.
    4. Louis-Philippe Rochon, 1999. "Credit, Money and Production," Books, Edward Elgar Publishing, number 1565.
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    Cited by:

    1. 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.
    2. 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, vol. 22(3), pages 317-354.
    3. Hamid Raza & Thibault Laurentjoye & Mikael Randrup Byrialsen & Sebastian Valdecantos, 2023. "Resurgence of inflation: Assessing the role of Macroeconomic Policies," Working Papers PKWP2301, Post Keynesian Economics Society (PKES).
    4. Kai D. Schmid, 2010. "Medium-run macrodynamics and the consensus view of stabilization policy," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 322/2010, Department of Economics, University of Hohenheim, Germany.
    5. Hiroshi Nishi, 2014. "Varieties of economic growth regimes, types of macroeconomic policies and policy regimes: a post-Keynesian analysis," Chapters, in: Hideko Magara (ed.), Economic Crises and Policy Regimes, chapter 5, pages 101-123, Edward Elgar Publishing.
    6. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    7. Noemi Levy-Orlik, 2012. "Financial Market Organizations, Central Banks and Credits: The Experience of Developing Economies," Chapters, in: Louis-Philippe Rochon & Salewa ‘Yinka Olawoye (ed.), Monetary Policy and Central Banking, chapter 5, Edward Elgar Publishing.

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