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The Macroeconomics of Industrial Strategy

Author

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  • Philip Arestis

    (The Jerome Levy Economics Institute)

  • Malcolm Sawyer

    (The Jerome Levy Economics Institute)

Abstract

This paper explores some of the links between macroeconomic policy and industrial strategy. The perspective of the present paper is to emphasis the role of the output and investment activities of enterprises rather than the general focus on the labour market in the determination of economic performance. We have explore this aspect in some detail in connection with the inflation barrier, and argue that such a barrier should be viewed in terms of a lack of capacity. We briefly review the balance of trade constraint on growth and employment. The over-all implications of those two sets of analyses is that macroeconomic performance would be enhanced by appropriate industrial strategy, and that inappropriate macroeconomic policies will damage industrial performance. Policies designed to restrain inflation by lowering the level of aggregate demand will tend to depress investment and harm capacity. Improved industrial performance requires a climate conducive to investment and research and development, which in turn depends on, inter alia, high and stable levels of aggregate demand.

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 1998. "The Macroeconomics of Industrial Strategy," Macroeconomics 9808002, EconWPA.
  • Handle: RePEc:wpa:wuwpma:9808002 Note: Type of Document - Acrobat PDF; prepared on IBM PC - PC; to print on PostScript; pages: 22; figures: included
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    References listed on IDEAS

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    1. Kaldor, Nicholas, 1972. "The Irrelevance of Equilibrium Economics," Economic Journal, Royal Economic Society, vol. 82(328), pages 1237-1255, December.
    2. J. S. L. McCombie & A. P. Thirlwall, 1997. "The Dynamic Harrod Foreign Trade Multiplier and the Demand-orientated Approach to Economic Growth: an Evaluation," International Review of Applied Economics, Taylor & Francis Journals, vol. 11(1), pages 5-26.
    3. Dixon, Huw David & Rankin, Neil, 1994. "Imperfect Competition and Macroeconomics: A Survey," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 171-199, April.
    4. Philip Arestis & Peter Skott, 1993. "Conflict, Wage Determination, and Hysteresis in U.K. Wage Determination," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 15(3), pages 365-386, March.
    5. Philip Arestis & Iris Biefang-Frisancho Mariscal, 1997. "Conflict, Effort and Capital Stock in UK Wage Determination," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 24(3), pages 179-193, October.
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    Cited by:

    1. Jamee K. Moudud, 2000. "Crowding In or Crowding Out? A Classical-Harrodian Perspective," Macroeconomics 0012001, EconWPA.
    2. Jamee K. Moudud, 1998. "Government Spending and Growth Cycles: Fiscal Policy in a Dynamic Context," Economics Working Paper Archive wp_260, Levy Economics Institute.

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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