Macroeconomics and natural rates: some reflections on Pasinetti’s fair rate of interest

Marc Lavoie and Mario Seccareccia ()
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Mario Seccareccia: Emeritus professor, University of Ottawa, Canada

Bulletin of Political Economy, 2019, vol. 13, issue 2, 139-165

Abstract: Monetary policy based on the Wicksellian natural rate of interest is progressively losing its hold on macroeconomic theory and policy. We advocate a ‘park it’ approach to monetary policy, where the interest rate is not set as a counter-cyclical tool based on this natural rate. The paper presents what has been called the Pasinetti rule, based on his concept of the fair or just rate of interest – a distribution-neutral rate. Central banks should insure that the nominal rate of interest – the long-term government bond rate – is equal to the growth rate of labour compensation.

Keywords: Monetary policy; Income distribution; Pasinetti rule; Fair interest rate (search for similar items in EconPapers)
JEL-codes: E11 E12 E25 E43 E58 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:awu:journl:v:13:y:2019:i:2:p:139-165

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