Central Banking, Stability and Macroeconomic Outcomes: A Comparison of New Consensus and Post-Keynesian Monetary Macroeconomics

Mark Setterfield

Chapter 2 in Central Banking in the Modern World, 2004, pp 35-56 from Edward Elgar Publishing

Abstract: According to the New Consensus in monetary economics, monetarism is dead and central bankers target low inflation rates by acting upon short-term real rates of interest. Yet, this synthesis hinges on variants of the long-run vertical Phillips curve originally proposed by Milton Friedman, the father of old-line monetarism. Contributors to this volume question this New Consensus. While they agree that the money supply should be conceived as endogenous, they carefully examine the procedures pursued by central banks, the monetary policy transmission mechanisms suggested by central bankers themselves, and the assumptions imbedded in the New Consensus. They propose alternative analyses that clearly demonstrate the limits of modern central banking and point to the possible instability of monetary economies.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2004
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