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

Jalal Qanas and Malcom Sawyer ()
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Malcom Sawyer: Emeritus Professor of Economics, Un iversity of Leed s an d IMK Fellow

Bulletin of Political Economy, 2019, vol. 13, issue 2, 189-208

Abstract: The paper considers some of the issues for the conduct of monetary and fiscal policy which arise in the era of financialisation. It opens with a critical assessment of the dominant approach to monetary policy, namely inflation targeting underpinned by the ‘new consensus in macroeconomics’. Within that analytical framework the role of the ‘natural rate of interest’ is critically examined. It is argued that that ‘natural rate of interest’ is a construct of a specific analytical framework and as such it lacks validity in reality in so far as that analytical framework does not provide a good approximation to that reality. This is followed by consideration of some of the issues of coordination between fiscal and monetary policies. It is argued that fiscal and monetary policies can not be separated (as is the case with the new consensus). The nature of a post-Keynesian monetary policy in the present era of financialisation, and particularly the developments of securitisation, is discussed.

Keywords: Monetary policy; fiscal policy; securitisation; financialisation interest rate (search for similar items in EconPapers)
JEL-codes: E52 E62 E63 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:awu:journl:v:13:y:2019:i:2:p:189-208

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