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Inflation targeting drawbacks in the absence of a 'natural' anchor

  • Angel Asensio


    (CEPN - Centre d'Economie de l'Université Paris Nord (ancienne affiliation) - Université 13 - CNRS)

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    The economic performances of the Eurozone look weaker than those of the United States overthe period 1999-2006, in spite of the fact that the former applies more thoroughly the 'newmacroeconomics' governance rules concerning public deficits and inflation control. Theliterature emphasizes Alan Greenspan's pragmatism when discussing the relative success ofthe Fed, but the reasons why pragmatism ought to do better than a thorough application of the'new macroeconomics' theoretical recommendations remain unexplored. The paper focuses onthe advantage of monetary policy pragmatism in the face of Keynesian uncertainty. Morespecifically, it points out the trials of the 'new macroeconomics' principles of monetary policywhen they are implemented in a Keynesian context, that is, within a system which does nothave any 'natural' anchor.

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    Paper provided by HAL in its series Post-Print with number halshs-00189225.

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    Date of creation: Nov 2007
    Date of revision:
    Publication status: Published in PostKeynesian economic policy, 2d bi-annual Dijon Conference of the CEMF, Université de Bourgogne., Nov 2007, Dijon, France
    Handle: RePEc:hal:journl:halshs-00189225
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    8. James Tobin, 1975. "Keynesian Models of Recession and Depression," Cowles Foundation Discussion Papers 387, Cowles Foundation for Research in Economics, Yale University.
    9. Giuseppe Fontana, 2006. "The Federal Reserve and the European Central Bank: a theoretical comparison of their legislative mandates," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 28(3), pages 433-450, April.
    10. Kurz, Mordecai, 1994. "On the Structure and Diversity of Rational Beliefs," Economic Theory, Springer, vol. 4(6), pages 877-900, October.
    11. Philip Arestis, 2006. "New Monetary Policy and Keynes," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 3(2), pages 245-262.
    12. Preston, Bruce, 2006. "Adaptive learning, forecast-based instrument rules and monetary policy," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 507-535, April.
    13. Philip Arestis & Malcolm Sawyer, 2003. "Inflation Targeting: A Critical Appraisal," Economics Working Paper Archive wp_388, Levy Economics Institute.
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