Theory of functional finance and the role of fiscal policy: A post-keynesian critique to the new consensus macroeconomics

Gabriel Caldas Montes () and Rômulo do Couto Alves ()

Brazilian Journal of Political Economy, 2012, vol. 32, issue 4, 670-688

Abstract: This paper presents the critical approaches and elaborates the arguments that oppose those of the New Consensus Macroeconomics regarding the conduct of fiscal policy. Those criticisms and arguments are based in the Post-Keynesian thought and the theory of Functional Finance. The theory of Functional Finance is an extension of the Keynesian approach, particularly with regard to discussions on public finances. As supports the theory of Functional Finance, the objectives to be pursued by fiscal policy should suggest the improvement of social welfare as a whole, i.e., the performance of inflation, employment and output should be taken into account by policymakers. JEL Classification: E12; E62; H63.

Keywords: fiscal policy; functional finance; post-Keynesian (search for similar items in EconPapers)
Date: 2012
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