A new paradigm for macroeconomic policy

Philip Arestis and Malcolm Sawyer ()

International Journal of Public Policy, 2011, vol. 7, issue 1/2/3, 22-39

Abstract: In this paper we advocate a way of approaching macroeconomic policy, which stands in contrast to the now discredited 'new consensus in macroeconomics' policy framework. The five pillars of our approach are: the need for budget deficits to support the level of aggregate demand; full consideration of income distribution and its implications for the level of demand; the interest rate policy pursued by the central bank should aim for a constant real rate of interest with that interest rate broadly in line with the rate of growth; the coordination of economic policies with the implication of an end of central bank independence; and the key policy objective of the central bank should be financial stability.

Keywords: fiscal policy; monetary policy; financial stability; budget deficits; income distribution; macroeconomics; consensuses; new consensus; aggregate demand; demand levels; interest rates; central banks; banking; constant rates; real rates; growth rates; policy coordination; bank independence; public policy; economic policies; alternative paradigms. (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijpubp:v:7:y:2011:i:1/2/3:p:22-39

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