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The Independent European Central Bank: Keynesian Alternatives

  • Philip Arestis

In this paper, the author aims to question the assumptions underlying the economic case for the independent European Central Bank (ECB) and argues that although a European Clearing Agency (ECA) of the type Keynes envisaged for the international economy is not a panacea for the economic problems of the European Union (EU), it is, nonetheless, a better way forward and far superior to the ECB. The paper (1) outlines the theoretical basis of Keynesian monetary and financial theory; (2) aims to ascertain the extent to which credit availability is affected by the creation of an ECB and, on that basis, to offer a critical analysis of current proposals for an ECB; (3) looks closely at the case for the ECA, seen as performing a range of functions rather than having a remit defined simply in terms of strict monetary control, including a commitment to providing the necessary finance for full employment and a responsibility for ensuring that the burden of balance-of-payments adjustment falls upon both deficit and surplus countries.

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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_274.

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Date of creation: Jul 1999
Date of revision:
Handle: RePEc:lev:wrkpap:wp_274
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  1. Panicos O. Demetriades & Philip Arestis, 1996. "Financial Development and Economic Growth: Assessing the Evidence," Keele Department of Economics Discussion Papers (1995-2001) 96/16, Department of Economics, Keele University.
  2. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
  3. Currie, David, 1993. "International Cooperation in Monetary Policy: Has It a Future?," Economic Journal, Royal Economic Society, vol. 103(416), pages 178-87, January.
  4. Arestis, Philip & Howells, Peter, 1996. "Theoretical Reflections on Endogenous Money: The Problem with 'Convenience Lending.'," Cambridge Journal of Economics, Oxford University Press, vol. 20(5), pages 539-51, September.
  5. Dornbusch, Rudiger, 1987. "Exchange Rate Economics: 1986," Economic Journal, Royal Economic Society, vol. 97(385), pages 1-18, March.
  6. Charles R. Bean, 1992. "Economic and Monetary Union in Europe," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 31-52, Fall.
  7. Arestis, Philip & Sawyer, Malcolm, 1997. "How Many Cheers for the Tobin Transactions Tax?," Cambridge Journal of Economics, Oxford University Press, vol. 21(6), pages 753-68, November.
  8. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-15, March.
  9. Davis, E. Philip, 1995. "Debt, Financial Fragility, and Systemic Risk," OUP Catalogue, Oxford University Press, number 9780198233312.
  10. Hicks, J. R., 1979. "Critical Essays in Monetary Theory," OUP Catalogue, Oxford University Press, number 9780198284239.
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