The partial effectiveness of monetary policy: a keynesian critique of the new neoclassical synthesis model

L’efficacité partielle de la politique monétaire: une critique keynésienne du modèle de la nouvelle synthèse néoclassique

Nicolas Piluso ()

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Abstract: Starting from the observation that monetary policy has difficulties in stimulating the economy in a recession by lowering interest rates, we propose a revision of the ISTRI model of Abraham-Frois (2003), or its more complete version proposed by Pollin (2003), which makes the DSGE model more easily accessible for students. We believe that these models are based on the unlikely assumption that monetary policy plays an effective stabilizing role. However, we identify situations in which this is not the case (downward rigidity of the interest rate and/or inelasticity of investment to the interest rate). In these cases, the shape of the aggregate demand curve is modified.By applying the postkeynesian critique that investment is only marginally sensitive to the interest rate in a DSGE-type model, we are led to invalidate many of its policy conclusions.

Keywords: unemployment; Inflation; Interest rate; Investment - Consent - Mandatory arbitration - Forced consent; DSGE model; ISLM model; chômage; Investissement; taux d'intérêt; modèle ISLM; Modèle DSGE; PIB (search for similar items in EconPapers)
Date: 2024
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Published in Revue d'économie financière, 2024, n° 155 (3), pp.161-170. ⟨10.3917/ecofi.155.0161⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04646208

DOI: 10.3917/ecofi.155.0161

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