Inflation targeting and macroeconomic stability in a Post Keynesian economy

Gilberto Tadeu Lima and Mark Setterfield ()

Journal of Post Keynesian Economics, 2008, vol. 30, issue 3, pages 435-461

Abstract: This paper examines the compatibility of inflation targeting with an economy that is Post Keynesian in character. We show that in a Post Keynesian environment, policymakers can both set and achieve an inflation target without adverse consequences for the real economy, as long as an appropriate policy mix is chosen. The latitude that policymakers have in making this choice is investigated. One of our key results is that orthodox policy regimes do not provide appropriate policy mixes. Indeed, the more orthodox the policy regime becomes, the less viable is inflation targeting in a Post Keynesian economy.

Keywords: incomes policy; inflation targeting; monetary policy; Post Keynesian economics; stability of equilibrium (search for similar items in EconPapers)
Date: 2008
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Working Paper: INFLATION TARGETING AND MACROECONOMIC STABILITY IN A POST KEYNESIAN ECONOMY (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:mes:postke:v:30:y:2008:i:3:p:435-461

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